Final answer:
Income must be taxed to the individual who earns it or is entitled to it, as per the assignment of income doctrine. This legal principle prevents tax avoidance through income transfers and ensures that the true earner is taxed.
Step-by-step explanation:
The assignment of income doctrine holds that income from a transaction must be taxed to the person who earns it or is otherwise entitled to it. In the context of taxation, the Internal Revenue Service (IRS) applies this doctrine to ensure that income is taxed to the individual who controls the earning of the income, rather than merely being the recipient of the income. For example, if a parent earns income but directs it to be paid to a child, the income should logically be taxed to the parent, as they are the true earners. This helps maintain the integrity of the tax system and prevents individuals from avoiding taxation by transferring income to others at a lower tax rate. In the United States, as well as in many other countries, individuals and businesses are required to file declarations of income and pay taxes on what they have earned to support government operations and societal needs.