Identify Which of the Following Statements Is True

question 32

Multiple Choice

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.

---

Definitions:

Fixed Costs

Costs that do not vary with the level of production or output, such as rent, salaries, and insurance.

Variable Costs

Variable costs are expenses that change in proportion to the level of production or business activity.

Average Fixed Costs

The total fixed costs of production divided by the number of units produced, representing the fixed cost per unit of output.

Total Costs

encompass all expenses incurred in the production of goods or services, including both fixed and variable costs.