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Tax Notes


Section 1041, shifting of income


The article reviews recent cases and rulings dealing with the interplay of section 1041 with both (1) the assignment of income doctrine in the deferred compensation context and (2) the substance over form doctrine in the context of redemptions of closely held stock. The author argues that such doctrines, which attempt to avoid improper shifting of income between taxpayers, are inappropriate in the context of section 1041 transfers in light of the history and goals of that section. She believes that final regulations adopted under section 1041 should ensure that the form of transfers or redemptions negotiated by the parties dictates the resulting tax.

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