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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?

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Final answer:

Instructing tenants to send rent checks to her daughter Jenine will not effectively shift the tax liability from Bendetta, as the IRS taxes income based on who earns it, not who receives the payment.

Step-by-step explanation:

Bendetta, a high-tax-rate taxpayer, instructing tenants to send their rent checks to her daughter Jenine will not effectively shift the income for tax purposes. The Internal Revenue Service (IRS) implements assignment of income rules, meaning income is taxed to the person who earns it. Simply directing income to another person does not transfer the tax liability associated with that income. Bendetta earned the income through her rental properties, and therefore she is liable for the taxes on that rental income. Shifting income in this manner may be considered a form of tax evasion, as the intent is to avoid taxes that rightfully should be paid by Bendetta.