The primary problem with this case is that Dylan’s rental income of $9,600 is being reported and taxed on by Melanie, which results in unacceptable tax avoidance by Dylan. The rent payments align with I.R.C. Section 61(a)(5), which provides that the rent payments are considered a source of gross income. Treas. Reg. Sec. 1.61-1(a) supports that the rental income must be recognized as gross income because it is received in the form of money and derived from his property. In the Lucas v. Earl (1930) case, it is concluded that income is taxed to the one who earned it. It cannot be transferred to a different person in order to help the income earner avoid taxation. Due to the fact that Dylan’s rent payments are derived off of his own property, he
