The Agency Exception to the Anticipatory Assignment Doctrine

4 Pages Posted: 11 Mar 2015 Last revised: 20 May 2016

See all articles by Douglas A. Kahn

Douglas A. Kahn

University of Michigan Law School

Jeffrey H. Kahn

Harry M. Walborsky Professor, Florida State University College of Law; Associate Dean, Business Program

Date Written: May 4, 2015

Abstract

One consequence of having graduated income tax rates is that it becomes advantageous to shift income from a high bracket taxpayer to a person in a lower tax bracket. A number of different vehicles have been tried to shift the incidence of the income tax to another person, and the courts and Congress have adopted a number of rules to prevent that from occurring. As early as 1930, the Supreme Court adopted the anticipatory assignment of income doctrine to prevent a person who anticipates earning income from his services from shifting that income to another person in a lower tax bracket. Income is taxed to the person whose services produced it rather than to the person who has the beneficial right to possess the income once it is earned.

This article discusses the tax treatment of an employee whose services create income for his employer. The anticipatory assignment of income doctrine does not apply in these circumstances under the so-called agency exception. This article explains the policy justification of the agency exception and uses examples to help illustrate when and when not the agency exception should apply.

Keywords: Anticipatory Assignment of Income, Anticipation of Income, Agency Exception

JEL Classification: H2, H20, H22, H24, H26, H29

Suggested Citation

Kahn, Douglas A. and Kahn, Jeffrey H., The Agency Exception to the Anticipatory Assignment Doctrine (May 4, 2015). Tax Notes, Vol. 146, p. 555, 2015, FSU College of Law, Public Law Research Paper No. 741, FSU College of Law, Law, Business & Economics Paper No. 15-10, U of Michigan Law & Econ Research Paper , U of Michigan Public Law Research Paper , Available at SSRN: https://ssrn.com/abstract=2575915 or http://dx.doi.org/10.2139/ssrn.2575915

Douglas A. Kahn

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4043 (Phone)

Jeffrey H. Kahn (Contact Author)

Harry M. Walborsky Professor, Florida State University College of Law; Associate Dean, Business Program ( email )

425 W. Jefferson Street
Tallahassee, FL 32306
United States
850.644.7474 (Phone)

HOME PAGE: http://www.law.fsu.edu/faculty/jkahn.html

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