Todd and Fiona are negotiating a divorce settlement. Todd has offered to pay Fiona $12,000 each year for 10 years, but payments cease upon Fiona's death. What are the tax implications of this proposition assuming is finalized in 2018?
I.Fiona must recognize Gross Income when the money is received.
II.Todd has a deduction for Adjusted Gross Income in the year of payment.
III.Since the payments are in cash and there is no obligation to pay more after Fiona's death, the payments are classified as alimony.
IV.If the payments qualify as child support, Fiona recognizes no gross income and Todd has no deduction from Adjusted Gross Income.

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

Question

Todd and Fiona are negotiating a divorce settlement. Todd has offered to pay Fiona $12,000 each year for 10 years, but payments cease upon Fiona's death. What are the tax implications of this proposition assuming is finalized in 2018?
I.Fiona must recognize Gross Income when the money is received.
II.Todd has a deduction for Adjusted Gross Income in the year of payment.
III.Since the payments are in cash and there is no obligation to pay more after Fiona's death, the payments are classified as alimony.
IV.If the payments qualify as child support, Fiona recognizes no gross income and Todd has no deduction from Adjusted Gross Income.
​
A)Only statement I is correct.
B)Only statement IV is correct.
C)Only statements I and II are correct.
D)Only statements I, II, and III are correct.
E)Statements I, II, III, and IV are correct.

Quizplus · Accepted Answer

The Answer of Todd and Fiona are negotiating a divorce settlement. Todd has offered to pay Fiona $12,000 each year for 10 years, but payments cease upon Fiona's death. What are the tax implications of this proposition assuming is finalized in 2018?
I.Fiona must recognize Gross Income when the money is received.
II.Todd has a deduction for Adjusted Gross Income in the year of payment.
III.Since the payments are in cash and there is no obligation to pay more after Fiona's death, the payments are classified as alimony.
IV.If the payments qualify as child support, Fiona recognizes no gross income and Todd has no deduction from Adjusted Gross Income.
​
A)Only statement I is correct.
B)Only statement IV is correct.
C)Only statements I and II are correct.
D)Only statements I, II, and III are correct.
E)Statements I, II, III, and IV are correct.

Todd and Fiona Are Negotiating a Divorce Settlement