Identify which of the following statements is true.
A)The assignment of income doctrine requires a cash method of accounting for a transferor/shareholder to recognize income when accounts receivable are transferred by the shareholder to the corporation in a Sec. 351 exchange in which no gain is otherwise recognized.
B)The assignment of income doctrine is a legislative requirement that income be taxed to the person who earns it.
C)The assignment of income doctrine does not apply if the transferor in a Sec. 351 exchange in which no gain is otherwise recognized transfers when a sole proprietor transfers substantially all the assets and liabilities of the transferor's trade or business to a controlled corporation.
D)All of the above are false.

Question

Quizplus · Accepted Answer

The assignment of income doctrine is a judicial doctrine that requires income to be taxed to the person who earns it. Option A is false because the doctrine applies to all methods of accounting, not just cash. Option B is false because it is a judicial doctrine, not a legislative requirement. Option C is true because there is an exception under the doctrine where the transferor is a sole proprietor who transfers substantially all the assets and liabilities of their trade or business to a controlled corporation in a Sec. 351 exchange where no gain is otherwise recognized.

Identify Which of the Following Statements Is True