Dave is a plumber who uses the cash method of accounting. This year Dave requested that his clients make their checks payable to his son, Steve. This year Steve received checks in the amount of $62,000 for Dave's plumbing services. Which of the following is a true statement?

Question

Quizplus · Accepted Answer

Dave is taxed on the $62,000 because it is income earned from his plumbing services, regardless of the checks being made payable to his son. This is an example of income assignment, which the IRS does not recognize for tax avoidance purposes; the income is taxed to the person who earned it.

Dave Is a Plumber Who Uses the Cash Method of Accounting