Under the terms of a divorce agreement entered into in 2018, Kim was to pay her husband Tom $7,000 per month in alimony. Kim's payments will be reduced to $3,000 per month when their 9 year-old son becomes 21. The husband has custody of their son. For a twelve-month period, Kim can deduct from gross income (and Tom must include in gross income):
A) $60,000.
B) $48,000.
C) $36,000.
D) $0.
E) None of these.

Question

Quizplus · Accepted Answer

Kim can deduct the full amount of alimony payments of $7,000 per month for the ten full months in which she made these payments between 2018 and when their son turns 21. Therefore, for that period, Kim can deduct $7,000 x 10 = $70,000 from her gross income.
For the two months during which Kim paid reduced alimony of $3,000, she cannot deduct them. Hence, the total amount she can deduct for that year is $70,000 - ($3,000 x 2) = $64,000.
Tom, on the other hand, must include the full $7,000 in his gross income for each of the 12 months of that year, totaling $84,000. Therefore, the total amount that Kim can deduct from her gross income is $64,000, which is option (C).

Under the Terms of a Divorce Agreement Entered into in 2018