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Taxation: Ownership and Income

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1.Bendetta, a high-tax-rate taxpayer, owns several rental properties and would like to shift some income to her daughter, Jenine. Bendetta instructs her tenants to send their rent checks to Jenine so Jenine can report the rental income. Will this shift the income from Bendetta to Jenine? Why, or why not?

2.Latrell recently used his Delta Skymiles to purchase a free roundtrip ticket to Milan, Italy (value $1,200). The frequent flyer miles used to purchase the ticket were generated from Latrell's business travel as a CPA. Latrell's employer paid for his business trips, and he was not taxed on the travel reimbursement. Use an available tax research service to determine how much income, if any, does Latrell have to recognize as a result of purchasing an airline ticket with Skymiles earned from business travel.

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Solution Summary

This solution explains the tax laws regarding rental income and sky miles, in relation to the questions presented. The relevant IRS tax codes are also cited.

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Will this shift the income from Bendetta to Jenine? Why, or why not?

No, this will not shift the income from Bendetta to Jenine. This falls under the "assignment of income" doctrine. This is a federal doctrine which states that the person who earns the income must claim the income for tax purposes, regardless ...

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