Washington Law Review


The Supreme Court developed the assignment of income doctrine to solve the question of who the proper taxpayer is under section 61 of the Internal Revenue Code. The question arises when individuals transfer income that rightly belongs to them without declaring the income for federal tax purposes. The assignment doctrine attributes income, for tax purposes, to the earner or practical owner of the income notwithstanding that person's assignment of the income. However, the Supreme Court's development of the doctrine has been inadequate, as exemplified by the recent decision of the Fifth Circuit Court of Appeals in Caruth Corp. v. United State. Caruth demonstrates the improper focus of the traditional doctrine on form rather than substance. The doctrine should be redefined to attribute assigned income to taxpayers based upon who controls and enjoys that income rather than upon the form of the transaction in which the income was transferred.

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