Identify Which of the Following Statements Is True

question 91

Multiple Choice

Identify which of the following statements is true.

• A) 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.
• 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 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.
• D) All of the above are false.

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Definitions:

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to products or services.

Manufacturing Cost

All expenses directly related to the production of goods, including raw materials, labor, and factory overhead.

Machine-Hours

A measure of production time, indicating the total hours that machines are operating in the manufacturing process.

Manufacturing Overhead

The indirect factory-related costs that are incurred when producing a product, including costs related to management, utilities, and equipment depreciation.