Sonya and Butch divorce during the current year.Their divorce agreement requires Sonya to pay Butch alimony of $2,500 monthly.When their son,Bubba,attains the earliest of either the age 23 or graduates from college,the payments will cease.
I.Butch must recognize gross income of $2,500 monthly.
II.Sonya may deduct $2,500 monthly from her gross income.
III.Butch will not recognize any gross income due to the payments.

A)Only statements I and II are correct.
B)Only statement I is correct.
C)Only statement II is correct.
D)Only statement III is correct.

Question

Sonya and Butch divorce during the current year.Their divorce agreement requires Sonya to pay Butch alimony of $2,500 monthly.When their son,Bubba,attains the earliest of either the age 23 or graduates from college,the payments will cease.
I.Butch must recognize gross income of $2,500 monthly.
II.Sonya may deduct $2,500 monthly from her gross income.
III.Butch will not recognize any gross income due to the payments.
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A)Only statements I and II are correct.
B)Only statement I is correct.
C)Only statement II is correct.
D)Only statement III is correct.

Quizplus · Accepted Answer

The payments are contingent on a child-related event (Bubba's age or graduation), making them child support, not alimony. Therefore, Butch does not recognize it as gross income.

Sonya and Butch Divorce During the Current Year