Please use microsoft excel for calculations. .LO.4 Casper and Cecile divorced in 2018. As part of the divorce settlement, Casper transferred stock to Cecile. Casperpurchased the stock for $25,000, and it had a market value of $43,000 on the date of the transfer. Cecile sold the stockfor $40,000 a month after receiving it. In addition, Casper is required to pay Cecile $1,500 a month in alimony. He madefive payments to her during the year.What are the tax consequences for Casper and Cecile regarding these transactions?a. How much gain or loss does Casper recognize on the transfer of the stock?b. Does Casper receive a deduction for the $7,500 alimony paid?c. How much income does Cecile have from the $7,500 alimony received?d. When Cecile sells the stock, how much does she report?Text Predictions: OnAccessibility: Investigate

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Please use microsoft excel for calculations.

.LO.4 Casper and Cecile divorced in 2018. As part of the divorce settlement, Casper transferred stock to Cecile. Casper
purchased the stock for $25,000, and it had a market value of $43,000 on the date of the transfer. Cecile sold the stock
for $40,000 a month after receiving it. In addition, Casper is required to pay Cecile $1,500 a month in alimony. He made
five payments to her during the year.
What are the tax consequences for Casper and Cecile regarding these transactions?
a. How much gain or loss does Casper recognize on the transfer of the stock?
b. Does Casper receive a deduction for the $7,500 alimony paid?
c. How much income does Cecile have from the $7,500 alimony received?
d. When Cecile sells the stock, how much does she report?
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According to the IRS, in a divorce case, the party paying alimony and separate maintenance is able to deduct those payments, whereas the person receiving them must include them in his or her gross income. Any transfer of property other than cash made during a divorce, however, is not taxed. The person transferring the property is not entitled to a deduction for it and does not realise any profit or loss from the transfer. Additionally, the party receiving the property does not recognise income and records the item's cost basis at the same level as the party transferring it.

a. As previously mentioned, neither gains nor losses are recognised by the party effecting the transfer. The stock transfer does not require Casper to record gains.

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