Which of the Following Is More Likely to Receive IRS

question 11

Multiple Choice

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.

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Definitions:

Accounting Profits

The difference between total revenue and explicit costs, representing the net income shown on a company's financial statements.

Implicit Costs

The opportunity costs associated with a company's use of resources that it owns, representing the potential income lost by not using those resources in an alternative way.

Total Revenues

The overall sum of money earned by a business from its sales of goods or services, calculated without deducting any expenses.

Marginal Product

The incremental increase in output resulting from the use of one additional unit of a resource, while keeping other resources constant.