However, a taxpayer can assign future income by making an assignment of property for value or a bona fide gift of the underlying property.
The doctrine does not apply if a right to income is sold or exchanged for value.
This result often applies to interest, dividends, rent, royalties, and trust income.
The doctrine applies when the taxpayer’s right to income is practically certain to occur.
If a gift of income-producing property is made, income earned after the date of the gift is taxed to the donee of the gift.
If a taxpayer assigns a claim to income that is contingent or uncertain, the assignee of the right is taxable on income that the assignee collects on the claim.The doctrine can apply to both individuals and corporations.A taxpayer cannot assign income that has already accrued from the property the taxpayer owns, and cannot avoid liability for tax on that income by assigning it to another person or entity.Under the assignment of income doctrine, gross income from personal services must be included in the gross income of the person who rendered the services.In addition, under that doctrine, gross income from property must be included in the gross income of the person who beneficially owns the property.To prevent perceived abuses of the Code, the Service has used, among other tools, various iterations of the assignment of income doctrine to prevent taxpayers from escaping tax liability through "anticipatory arrangements and contracts however skillfully devised." However, while the Service and the courts have often emphasized the importance of substance over form, the modern iteration of the assignment of income doctrine indicates a striking preference for a form-based test, as exemplified in Owen v. In Owen, the Tax Court invoked the assignment of income doctrine and the related control of income test from Johnson v.Commissioner to find against a taxpayer with respect to his attempts to have earned income taxed to his personal service corporation (PSC) rather than to himself.If a taxpayer transfers appreciated property prior to a sale or exchange, the appreciation is income to the person owning the property at the time of the sale or exchange.The Bloomberg Tax Portfolio, Gross Income: Tax Benefit, Claim of Right and Assignment of Income, No.The doctrine is invoked, for example, for assignments to creditors, family members, charities, and controlled entities.Thus, the income is taxable to the person who earned it, even if the person assigns the income to another and never personally receives the income.