A stockholder's donation to a corporation is subject to donor's tax based on which principle?

A stockholder's donation to a corporation is subject to donor's tax based on which principle?

• A. Entity Theory
• B. Lifeblood Theory
• C. Benefit Received Principle
• D. Tax Benefit Rule

Answer: (D)

The principle underlying donor's tax in the context of a stockholder's donation to a corporation is best captured by the Tax Benefit Rule. This rule posits that a donor may be subject to tax if the recipient corporation benefits from the donation. Essentially, if a stockholder's contribution provides a tangible benefit to the corporation, it triggers a tax liability for the donor. When evaluating a donation from a stockholder to a corporation, the Tax Benefit Rule takes into account the value received by the corporation as a result of the donation. This aligns with the idea that the intention behind the donation, whether it is to support the corporation's operations or enhance its capital, can lead to a tax implication for the donor. By recognizing the direct benefit that the corporation receives from the contribution, the Tax Benefit Rule creates a basis for imposing a donor's tax. In contrast, entity theory focuses on the separate existence of the corporation from its shareholders and generally does not address the tax implications of donations. The lifeblood theory emphasizes the necessity of capital for a corporation's survival, which can relate to why the corporation might benefit from donations but does not directly establish a tax basis. Lastly, the benefit received principle typically revolves around the treatment of benefits received by the donor rather than

The principle underlying donor's tax in the context of a stockholder's donation to a corporation is best captured by the Tax Benefit Rule. This rule posits that a donor may be subject to tax if the recipient corporation benefits from the donation. Essentially, if a stockholder's contribution provides a tangible benefit to the corporation, it triggers a tax liability for the donor.

When evaluating a donation from a stockholder to a corporation, the Tax Benefit Rule takes into account the value received by the corporation as a result of the donation. This aligns with the idea that the intention behind the donation, whether it is to support the corporation's operations or enhance its capital, can lead to a tax implication for the donor. By recognizing the direct benefit that the corporation receives from the contribution, the Tax Benefit Rule creates a basis for imposing a donor's tax.

In contrast, entity theory focuses on the separate existence of the corporation from its shareholders and generally does not address the tax implications of donations. The lifeblood theory emphasizes the necessity of capital for a corporation's survival, which can relate to why the corporation might benefit from donations but does not directly establish a tax basis. Lastly, the benefit received principle typically revolves around the treatment of benefits received by the donor rather than