Arnold and Barbara Cane were divorced in June 2018. Pursuant to the divorce decree, Arnold is obliged to perform as follows:

a. Transfer title of their personal home to Barbara. They purchased the house in 2010 and their basis today is \(\$ 400,000\). The fair market value of the house is \(\$ 500,000\). The house is subject to a 25 year, \(\$ 250,000\) mortgage.

b. Arnold is to continue making payments on the house until it is fully paid off. In 2018, Arnold made payments totaling \(\$ 18,000\).

c. Arnold is to make \(\$ 3,000\) per month payments to Barbara. Of this amount one-half is for child support. The divorce decree further states that alimony is to cease upon the death of the wife. In 2018 , he made six payments.

How do the transactions in the divorce agreement affect Arnold's and Barbara's taxable income?