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Divorce and the Assignment of Income Doctrine
One who is entitled to receive income, including interest or compensation for services, but assigns the income to another before it becomes due, will be taxed on it just as though he or she had actually received it and then paid it over to the assignee. This concept is known as the assignment of income doctrine. Harrison v. Schaffner, 312 U.S. 579, 580, 61 S.Ct. 759, 760-61, 85 L.Ed. 1055 (1941). Decisions have been based on the principle that the power to dispose of income is the equivalent of ownership of it and that the exercise of the power to procure its payment to another is contemplated by the Internal Revenue Code provisions taxing income derived from any source whatever. The United States Supreme Court explained the doctrine in Harrison v. Schaffner: “One vested with the right to receive income does not escape the tax by any kind of anticipatory arrangement, however skillfully devised, by which he procures payment of it to another, since, by the exercise of his power to command the income, he enjoys the benefit of the income on which the tax is laid.”
In Harrison, Justice Holmes metaphorically discussed the doctrine in terms of “fruits” and “trees” as the distinction between income and the income-producing asset. The rule is that fruits may not, for tax purposes, be attributed “to a different tree from that on which they grew.” Lucas v. Earl, 281 U.S. 111, 115, 50 S.Ct. 241, 74 L.Ed. 731 (1930).
Inapplicability of Doctrine
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