Deck 11: Tax Consequences of Separation and Divorce

Question 1

In a property division, the price that can be obtained for property by a willing buyer and willing seller is called:

A)realized gain
B)fair market value
C)adjusted bases
D)appreciation
E)a and d

Answer 1

B

Question 2

Tax effecting a separation agreement means determining what taxes, if any, will be owed to the Internal Revenue Service if the agreement goes into effect.

Answer 2

True

Question 3

List the tax consequences of the transfer of appreciated property incident to a divorce.

Answer 3

There is no deduction by the transferor. The transferee does not include the
property as income. The transferor pays no taxes on the appreciation. The basis of the
property in the hands of the transferee is the adjusted basis that the property had in the
hands of the transferor.

Question 4

MATCHING

Match each numbered entry with the most relevant lettered entry below.

a. recipient
b. increase in value
c. fixed sum payable periodically
d. no compulsion to sell
e. initial capital investment
f. to receive an actual benefit or loss
g. a legal share or right in something
h. lifetime and testamentary transfers
i. relief from tax obligation
j. after allowable deductions
appreciation

Question 5

Alimony is currently deductible by the payor, not the payee.

Question 6

Sales at fair market value are at arm's length.

Question 7

Sam bought a house for $200,000. He spent $50,000 to add a room. He sold the house for $260,000.

A)his basis is $150,000
B)the appreciation is $50,000
C)the appreciation is $60,000

Question 8

Same facts as question 7. The adjusted basis of the house is:

A)$200,000
B)$250,000
C)$260,000

Question 9

Same facts as question 7. The realized gain is:

A)$50,000
B)$260,000
C)$10,000

Question 10

What is meant by joint and several liability?

Question 11

MATCHING

Match each numbered entry with the most relevant lettered entry below.

a. recipient
b. increase in value
c. fixed sum payable periodically
d. no compulsion to sell
e. initial capital investment
f. to receive an actual benefit or loss
g. a legal share or right in something
h. lifetime and testamentary transfers
i. relief from tax obligation
j. after allowable deductions
transferee

Question 12

What is the distinction between an inter vivos gift and a testamentary gift?

Question 13

MATCHING

Match each numbered entry with the most relevant lettered entry below.

a. recipient
b. increase in value
c. fixed sum payable periodically
d. no compulsion to sell
e. initial capital investment
f. to receive an actual benefit or loss
g. a legal share or right in something
h. lifetime and testamentary transfers
i. relief from tax obligation
j. after allowable deductions
innocent spouse

Question 14

What are capital improvements?

Question 15

MATCHING

Match each numbered entry with the most relevant lettered entry below.

a. recipient
b. increase in value
c. fixed sum payable periodically
d. no compulsion to sell
e. initial capital investment
f. to receive an actual benefit or loss
g. a legal share or right in something
h. lifetime and testamentary transfers
i. relief from tax obligation
j. after allowable deductions
interest

Question 16

The adjusted basis is one's total income from all of a person's taxable sources less specifically allowed deductions.

Question 17

Joint and several liability exists when the main debtor is required to pay no more than his or her share of the entire debt.

Question 18

MATCHING

Match each numbered entry with the most relevant lettered entry below.

a. recipient
b. increase in value
c. fixed sum payable periodically
d. no compulsion to sell
e. initial capital investment
f. to receive an actual benefit or loss
g. a legal share or right in something
h. lifetime and testamentary transfers
i. relief from tax obligation
j. after allowable deductions
adjusted basis

Question 19

MATCHING

Match each numbered entry with the most relevant lettered entry below.

a. recipient
b. increase in value
c. fixed sum payable periodically
d. no compulsion to sell
e. initial capital investment
f. to receive an actual benefit or loss
g. a legal share or right in something
h. lifetime and testamentary transfers
i. relief from tax obligation
j. after allowable deductions
marital deduction

Question 20

When is a transfer incident to divorce?

Question 21

MATCHING

Match each numbered entry with the most relevant lettered entry below.

a. recipient
b. increase in value
c. fixed sum payable periodically
d. no compulsion to sell
e. initial capital investment
f. to receive an actual benefit or loss
g. a legal share or right in something
h. lifetime and testamentary transfers
i. relief from tax obligation
j. after allowable deductions
cost basis

Question 22

MATCHING

Match each numbered entry with the most relevant lettered entry below.

a. recipient
b. increase in value
c. fixed sum payable periodically
d. no compulsion to sell
e. initial capital investment
f. to receive an actual benefit or loss
g. a legal share or right in something
h. lifetime and testamentary transfers
i. relief from tax obligation
j. after allowable deductions
fair market value

Question 23

MATCHING

Match each numbered entry with the most relevant lettered entry below.

a. recipient
b. increase in value
c. fixed sum payable periodically
d. no compulsion to sell
e. initial capital investment
f. to receive an actual benefit or loss
g. a legal share or right in something
h. lifetime and testamentary transfers
i. relief from tax obligation
j. after allowable deductions
realize

Question 24

MATCHING

Match each numbered entry with the most relevant lettered entry below.

a. recipient
b. increase in value
c. fixed sum payable periodically
d. no compulsion to sell
e. initial capital investment
f. to receive an actual benefit or loss
g. a legal share or right in something
h. lifetime and testamentary transfers
i. relief from tax obligation
j. after allowable deductions
annuity