Under the terms of a divorce agreement, 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

Ron paid $120,000 during the year, but $36,000 of that is not deductible as alimony because it represents the reduced payments after the child reached age 18. Therefore, Ron can deduct $84,000 as alimony and Jill must include $84,000 in her gross income.

Under the Terms of a Divorce Agreement, Ron Is to Pay