Chapter 2, Problem 27P

Answer the following questions:

1. Under a 2017 divorce agreement, Joan is required to pay her ex-husband, Bill, $ 700 a month until their daughter is 18 years of age. At that time, the required payments are reduced to $ 450 per month.

1. How much of each $ 700 payment may be deducted as alimony by Joan? $____________

2. How much of each $ 700 payment must be included in Bill's taxable income? $____________

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

2. Under the terms of a property settlement executed during 2019, Jane transferred property worth $ 450,000 to her ex-husband, Tom. The property has a tax basis to Jane of $ 425,000.

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? $____________