L and M are married and file a joint return.Having no children of their own, they adopted a three year old "special needs" child.L and M incurred $10,000 in qualified adoption expenses such as adoption fees, attorney fees and court costs.The $10,000 was furnished to M under an adoption assistance program maintained by his employer.Assuming L and M's AGI for the current year amounts to $105,000 before considering adoption assistance, how much of the $10,000 payment must the couple include in their gross income?

Question

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Under IRS regulations, adoption assistance payments are excludable from gross income up to the maximum limit for the tax year, which for 2020 is $14,300. Since M received a payment of $10,000 under an adoption assistance program, this entire amount can be excluded from L and M's gross income. Therefore, the answer is A) $0.

L and M Are Married and File a Joint Return