Problem 2-27 (Algorithmic) Alimony (LO 2.13)

Answer the following questions:

If your answer is zero, enter "0".

a. Under a 2017 divorce agreement, Joan is required to pay her ex-husband, Bill, $3,770 a month until their daughter is 18 years of age. At that time, the required payments are reduced to $2,639 per month.

1. How much of each $3,770 payment may be deducted as alimony by Joan? $......................

2. How much of each $3,770 payment must be included in Bill's taxable income? $......................

3. How much would be deductible/included if the divorce agreement were dated 2019? $......................

b. Under the terms of a property settlement executed during 2019, Jane transferred property worth $615,150 to her ex-husband, Tom. The property has a tax basis to Jane of $492,120.

1. How much taxable gain must be recognized by Jane at the time of the transfer? $......................

2. What is the amount of Tom's tax basis in the property he received from Jane? $......................