Assignment of Income

Assignment of Income

Learn how the federal tax laws generally allocate income to specific taxpayers.


In this lesson, we'll study the assignment-of-income rules, which the government uses to determine whom to tax on specific income.

Income from Services Generally

The first rule we need to learn is that income from services is typically taxable to the person performing the services, even if paid to someone else. Lucas v. Earl, 281 U.S. 111 (1930). Suppose an attorney earns $50,000 in legal fees. The attorney owes a creditor $50,000 and instructs the client to pay the fee directly to the...