Problem $4-45($LO$.4)$

Nell and Kirby are in the process of negotiating their divorce agreement, to be finalized in $2023.$ What should be the tax consequences to Nell and Kirby if the following, considered individually, became part of the agreement?

a$.$ In consideration for her one$-$half interest in their personal residence, Kirby will transfer to Nell stock with a value of $$200,000$ and $$50,000$ of cash. Kirby's cost of the stock was $$150,000,$ and the value of the personal residence is $$500,000.$ They purchased the residence three years ago for $$300,000.$

The transfer of both the stock and property $$ is a nontaxable event.

Nell's basis for the stock is $

Kirby's basis in the house is $ $.$

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When a married couple divorce or become legally separated, state law generally requires a division of the property accumulated during the marriage. In addition, one spouse may have a legal obligation to support the other spouse. The Code distinguishes between the support payments $($alimony or separate maintenance$)$ and the property division in terms of the tax consequences.

b$.$ Nell will receive $$1,000$ per month for $120$ months. If she dies before receiving all $120$ payments, the remaining payments will be made

$$ Only if the payments are classified as alimony

Only if the payments are classified as a property settlement

Regardless of the classification as alimony or property settlement

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Jayments are neither included in Nell's gross income nor deductible by

$r2018.$

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b$.$ Nell will receive $$1,000$ per month for $120$ months. If she dies before receiving all $120$ payments, the remaining payments will be made to her estate.

Only if the payments are classified as alimony $x,$ the payments are neither included in Nell's gross income nor deductible by Kirby since they are pursuant to a divorce agreement reached after $2018.$

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c$.$ Nell is to have custody of their $12-$year$-$old son, Bobby. She is to receive $$1,200$ per month until Bobby $(1)$ dies or $(2)$ attains age $21($whichever occurs first$).$ After either $c$ only $$300$ per month for the remainder of her life.

The monthly payments are considerec $$ child support payments are excluded from Nell's gri alimony payments are classified as child support $x,$ the part child support and part alimony and Kirby may not deduct the payments.

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b$.$ Nell will receive $$1,000$ per month for $120$ months. If she dies before receiving all $120$ payments, the remaining payments will be made to her estate.

Only if the payments are classified as alimony $x,$ the payments are neither included in Nell's gross income nor deductible by Kirby since they are pursuant to a divorce agreement reached after $2018.$

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c$.$ Nell is to have custody of their $12-$year$-$old son, Bobby. She $($whichever occurs first$).$ After either of these events occurs, $Ne$

Only if the payments are classified as alimony

The monthly payments are considered child support $x$ Only if the payments are classified as child support payments are excluded from Nell's gross income as they are re Regardless of the classification of the payments as child support or alimony

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c$.$ Nell is to have custody of their $12-$year$-$old son, Bobby. She is to receive $$1,200$ per month until Bobby $(1)$ dies or $(2)$ attains age $21($whichever occurs first$).$ After either of these events occurs, Nell will receive only $$300$ per month for the remainder of her life.

The monthly payments are considered $x.$ Only if the payments are classified as child support $x,$ the payments are excluded from Nell's gross income as they are received by her, and Kirby may not deduct the payments.

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d$.$ How would the answer to part $($b$)$ change if the divorce had been finalized in $2017?$

Even if the divorce were settled in $2017,$ the cash payments of $ per montr $EE$ as alimony because they cease upon Nell's death. Theref