Joe and Bonnie were divorced. Their only marital property was a personal residence with a value of $250,000 and cost of $200,000. Under the terms of the divorce agreement which did not include the word "alimony," Bonnie was to receive the house, and she was to pay Joe $9,000 each year for ten years. If Joe died before the end of the ten years, the payments would cease. Bonnie and Joe lived apart when Joe received the payments. Choose one answer.

a. Joe does not recognize any income from the above transaction.

b. Joe must recognize a $25,000 [1/2 ($250,000 - $200,000)] gain on the sale of his interest in the house.

c. Bonnie can deduct $9,000 a year for the alimony paid.

d. Bonnie must recognize gross income of $125,000.

e. None of the above.

Answer rating: 100% (QA)

c Bonnie can deduct 9000 a year for the alimony paid The 9000 Bonnie pays each year is ali... View the full answer