Dick and Jane are divorced in 2016. At the time of the divorce, Dick had a lawsuit pending. He had filed suit against a former employer for overtime pay. As part of a divorce agreement, Dick agreed to pay Jane one-half of the proceeds from the lawsuit. In 2017, Dick collected $250,000 from the former employer and paid Jane $125,000. What are the tax consequences for Dick receiving the $250,000 and then paying Jane the $125,000?

Question

Quizplus · Accepted Answer

The Answer of Dick and Jane are divorced in 2016. At the time of the divorce, Dick had a lawsuit pending. He had filed suit against a former employer for overtime pay. As part of a divorce agreement, Dick agreed to pay Jane one-half of the proceeds from the lawsuit. In 2017, Dick collected $250,000 from the former employer and paid Jane $125,000. What are the tax consequences for Dick receiving the $250,000 and then paying Jane the $125,000?

Dick and Jane Are Divorced in 2016