Question

13. Which of the following would cause an employee of Hill Corp to recognize income under the economic benefit doctrine?

(A) The employer places assets in a revocable trust for the future benefit of the employee.

(B) The employer makes an irrevocable promise to pay a future benefit to the employee.

(C) The employer places the assets in a rabbi trust.

(D) The employer places the assets in a secular trust.

Answer 1

Solution: The employer makes an irrevocable promise to pay a future benefit to the employee.

Explanation: Under economic benefit doctrine a person would be taxed when assets are irrevocably and unconditionally paid into a trust or fund for sole employee’s benefit and employee is also vested in the fund