Dick and Jane Are Divorced in 2017

question 85

Essay

Dick and Jane are divorced in 2017. 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 2018, 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?

---

Definitions:

AASB 137

A standard issued by the Australian Accounting Standards Board that deals with the accounting for provisions, contingent liabilities, and contingent assets.

Share Buy-backs

The process by which a company buys back its own shares from the marketplace, reducing the amount of outstanding stock.

Accounting Standard

Guidelines and rules set by a recognized standard-setting body that dictate how financial transactions and other accounting events should be reported in financial statements.

Share Buy-back

A corporate financial strategy in which a company purchases its own shares from the marketplace, reducing the number of outstanding shares.