George and Georgette divorced in 2017.George was ordered to pay (and does pay) Georgette $600 per month alimony and $800 per month child support.In addition, George transferred title to his half of their stock to Georgette last year.The stock had a basis of $120,000 and a fair market value of $260,000 at the date of the transfer.This year Georgette sells the stock for $280,000.What is Georgette's income for this year if she has no other income items?
A)$7,200
B)$19,200
C)$159,200
D)$167,200

Question

Quizplus · Accepted Answer

Georgette's income for the year includes the alimony payments but not the child support payments. The alimony payments total $7,200 ($600 per month x 12 months). The sale of the stock results in a capital gain. The basis of the stock for Georgette is the same as it was for George at the time of the transfer, which is $120,000. Since she sold the stock for $280,000, her gain is $280,000 - $120,000 = $160,000. Therefore, her total income for the year is $7,200 (alimony) + $160,000 (gain from the sale of the stock) = $167,200.

George and Georgette Divorced in 2017