Ophra is a cash basis taxpayer who is employed in the publishing industry. This year her employer informed her that because of her outstanding performance she is entitled to a free world cruise. Ophra asked her employer to issue the cruise tickets to her parents, and he complied with this request. Identify the principle that will determine whether Ophra or her parents are taxed on the value of the cruise tickets:

Question

Quizplus · Accepted Answer

The assignment of income principle states that income is taxed to the person who earns it, regardless of who actually receives it. Since Ophra earned the cruise tickets through her performance, she is taxed on their value, even though they were given to her parents.

Ophra Is a Cash Basis Taxpayer Who Is Employed in the Publishing