Ellie, age 12, earns wages of $4,300 from her modeling. Since the fees are collected by Ellie's father and used for Ellie's living expenses, her father intends to include it in his gross income.
I.Ellie received no cash so does not have to report any income.
II.The Assignment of Income Doctrine prohibits the father from recognizing the $4,300.
III.Even if Ellie desired to gift the $4,300 to her father, Ellie must recognize the income she earned.

A)Only statement I is correct.
B)Only statement II is correct.
C)Only statement III is correct.
D)Only statements II and III are correct.
E)Statements I, II, and III are correct.

Question

Ellie, age 12, earns wages of $4,300 from her modeling. Since the fees are collected by Ellie's father and used for Ellie's living expenses, her father intends to include it in his gross income.
I.Ellie received no cash so does not have to report any income.
II.The Assignment of Income Doctrine prohibits the father from recognizing the $4,300.
III.Even if Ellie desired to gift the $4,300 to her father, Ellie must recognize the income she earned.
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A)Only statement I is correct.
B)Only statement II is correct.
C)Only statement III is correct.
D)Only statements II and III are correct.
E)Statements I, II, and III are correct.

Quizplus · Accepted Answer

Statement I is incorrect because even if Ellie did not receive cash, she still earned income and needs to report it. 
Statement II is correct because the Assignment of Income Doctrine states that income cannot be assigned to another person to avoid taxes. 
Statement III is correct because even if Ellie gifts the income to her father, she still needs to recognize it as her earned income.

Ellie, Age 12, Earns Wages of $4,300 from Her Modeling