Which of the Following Is More Likely to Receive IRS

question 38

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:

Fiscal Net Income

The difference between total revenue and total expenditures of a government over a specified financial period, often used to gauge a government's financial health.

Dividends Declared

An announcement by a company's board of directors to distribute a portion of the firm's earnings to shareholders, specifying the amount and payment date.

Unrealized Profits

Profits that have been earned but not yet realized through the sale of an asset; these profits exist on paper but have not resulted in actual cash inflow.

Consolidated Financial Statements

Financial statements that show the financial position, results of operations, and cash flows of a parent and its subsidiaries as a single economic entity.