Bob is the national sales manager of Francis Sales Ltd. He owns 12.5% of the common shares of the corporation, having exercised stock options in previous years. He was not involved in the financial management of the corporation. On June 9, 2020, he borrowed $200,000 from the corporation, under its employee-loan policy applicable to all full-time employees, to finance the purchase of a condominium for him to live in Dundas, Ontario, near the head office of the company. Under the terms of the loan plan, Bob signed an agreement on the day he received the loan to pay interest at 2% annually on the first day of each month during which the loan was outstanding and to repay the principal in 20 equal annual instalments on January 1 of each year, beginning January 1, 2022.

Required:
(a) Indicate each of the conditions necessary to exclude the principal amount of the loan from Bob’s income and indicate, briefly from the facts, how each condition is satisfied.
(b) Compute the amount of the interest benefit to be included in Bob’s income in 2021 in respect of the loan.