Tim and Janet Divorced in 2018

question 75

Multiple Choice

Tim and Janet divorced in 2018.Their only marital property was a personal residence with a value of $120,000 and cost of $50,000.Under the terms of the divorce agreement, Janet would receive the house and would pay Tim $15,000 each year for five years, or until Tim's death, whichever should occur first.Tim and Janet lived apart when the payments were made to Tim.The divorce agreement did not contain the word "alimony."

• A)Tim must recognize a $35,000 [$60,000 - 1/2($50,000)] gain on the sale of his interest in the house.
• B)Tim does not recognize any income from these transactions.
• C)Janet is not allowed any alimony deductions.
• D)Janet is allowed to deduct $15,000 each year for alimony paid.
• E)None of these.

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Definitions:

Brightness Constancy

The tendency to perceive an object as being just as bright even though lighting conditions change its intensity.

Luminous

Emitting or reflecting light, brightly shining, often used to describe objects that can glow in the dark.

Law of Continuity

A principle in Gestalt psychology stating that elements that appear to follow in the same pathway tend to be grouped together perceptually.

Unity

The state of being united or joined as a whole, often used to describe a sense of harmony and togetherness among group members.