Charles and Camilla Are Getting Divorced

question 17

Multiple Choice

Charles and Camilla are getting divorced. Under the terms of the decree Charles will payCamilla $50,000 in cash in each of the next five years (or until Camilla's death orremarriage) . In addition, Charles will transfer a castle worth $2,000,000 to Camilla and pay $12,000 per year to support their son, Clyde, until he turns 19 years old. Whatamount (if any) is included in Camilla's gross income this year?

• A) $50,000
• B) $2,050,000
• C) $12,000
• D) $2,062,000
• E) None of the payments are included in gross income

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Definitions:

Elasticity

The indicator of the responsiveness of the demand or supply of a product to shifts in key factors like price or income.

Perfectly Elastic

A perfectly elastic demand or supply refers to a situation where the quantity demanded or supplied changes infinitely in response to any change in price, represented by a horizontal line on a graph.

Tax Burden

The measure of taxes that an individual or business is required to pay, expressed as a percentage of income or profit.

Tax Increase

A rise in the rate at which individuals or businesses are taxed by the government.