Thelma and Mitch Were Divorced

question 74

Multiple Choice

Thelma and Mitch were divorced. The couple had a joint brokerage account that included stocks with a basis of $600,000 and a fair market value of $1,000,000. Under the terms of the divorce agreement, Mitch would receive the stocks and Mitch would pay Thelma $100,000 each year for 6 years, or until Thelma's death, whichever should occur first. Thelma and Mitch lived apart when the payments were made by Mitch. Mitch paid the $600,000 to Thelma over the six-year period. The divorce agreement did not contain the word "alimony." Then, Mitch sold the stocks for $1,300,000. Mitch's recognized gain from the sale is:

• A)$0.
• B)$1,000,000 ($1,300,000 - $300,000).
• C)$700,000 ($1,300,000 - $600,000).
• D)$300,000 ($1,300,000 - $1,000,000).
• E)None of these.

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Definitions:

Total Fertility Rate

The average number of children per lifetime birthed by a nation’s women.

Population Constant

A condition where the size of a population remains unchanged over time due to balanced birth and death rates.

Productive Resources

Factors used in the production of goods and services, which include land, labor, capital, and entrepreneurship.

Fertility Rates

The average number of children that would be born to a woman over her lifetime in a particular population.