Which of the following is more likely to receive IRS scrutiny under the assignment of income doctrine?
A)A corporation paying its shareholders a $20,000 dividend.
B)A parent employing her child in the family business.
C)A taxpayer gifting stock to his children.
D)A cash-basis business delaying billing its customers until after year-end.
E)None of the choices are correct.

Question

Quizplus · Accepted Answer

The assignment of income doctrine states that income cannot be assigned to a third party in order to avoid taxation. Option B involves a parent employing her child in the family business, which is a common way to assign income to a lower tax bracket. Therefore, the IRS is more likely to scrutinize this arrangement to ensure that it complies with the doctrine. The other options do not involve the assignment of income to a third party, so they are less likely to be scrutinized under this doctrine.

Which of the Following Is More Likely to Receive IRS