Under the terms of a divorce agreement entered into in 2017, Ron is to pay his former wife Jill $10,000 per month. The payments are to be reduced to $7,000 per month when their 15-year old child reaches age 18.During the current year, Ron paid $120,000 under the agreement.Assuming all of the other conditions for alimony are satisfied, Ron can deduct from gross income (and Jill must include in gross income) as alimony:
A)$120,000.
B)$84,000.
C)$36,000.
D)$0.
E)None of these is correct.

Question

Quizplus · Accepted Answer

Under the terms of the divorce agreement, Ron is to pay $10,000 per month until their 15-year old child reaches age 18, at which point the payments are reduced to $7,000 per month. Therefore, for the current year, Ron paid for 12 months at $10,000 per month for a total of $120,000.

Of this amount, $84,000 ($7,000 x 12) qualifies as deductible alimony for Ron, and Jill must include this amount in her gross income. The remaining $36,000 ($3,000 x 12) does not qualify as alimony because it represents child support, which is not deductible by Ron and not includible in Jill's gross income.

Under the Terms of a Divorce Agreement Entered into in 2017