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 Nell's basis for the stock is $ Kirby's basis in the house is $ is a nontaxable event. 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. the payments are neither included in Nell's gross income nor deductible by Kirby since they are pursuant to a divorce agreement reache after 2018. 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 payments are excluded from Nell's gross income The monthly payments are considered as they are received by her, and Kirby may not deduct the payments. d. How would the answer to part (b) change if the divorce had been finalized in 2017? per month Even if the divorce were settled in 2017, the cash payments of: as alimony because they cease upon Nell's death. Therefore, the payments would still be excluded from Nell's gross income and by Kirby.
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 Nell's basis for the stock is $ Kirby's basis in the house is $ is a nontaxable event. 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. the payments are neither included in Nell's gross income nor deductible by Kirby since they are pursuant to a divorce agreement reache after 2018. 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 payments are excluded from Nell's gross income The monthly payments are considered as they are received by her, and Kirby may not deduct the payments. d. How would the answer to part (b) change if the divorce had been finalized in 2017? per month Even if the divorce were settled in 2017, the cash payments of: as alimony because they cease upon Nell's death. Therefore, the payments would still be excluded from Nell's gross income and by Kirby.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text: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
Nell's basis for the stock is $
Kirby's basis in the house is $
is a nontaxable event.
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.
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.
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 payments are excluded from Nell's gross income
The monthly payments are considered
as they are received by her, and Kirby may not deduct the payments.
d. How would the answer to part (b) change if the divorce had been finalized in 2017?
per month
Even if the divorce were settled in 2017, the cash payments of $
as alimony because they
cease upon Nell's death. Therefore, the payments would still be excluded from Nell's gross income and
by Kirby.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 6 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education