Todd and Fiona Are Negotiating a Divorce Settlement

question 111

Multiple Choice

Todd and Fiona are negotiating a divorce settlement.Todd has offered to pay Fiona $12,000 each year for 10 years,but payments cease upon Fiona's death.What are the tax implications of this proposition?
I.Fiona must recognize Gross Income when the money is received.
II.Todd has a deduction for Adjusted Gross Income in the year of payment.
III.Since the payments are in cash and there is no obligation to pay more after Fiona's death,the payments are classified as alimony.
IV.If the payments qualify as child support,Fiona recognizes no gross income and Todd has no deduction from Adjusted Gross Income.
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• A)Only statement I is correct.
• B)Only statement IV is correct.
• C)Only statements I and II are correct.
• D)Only statements I,II,and III are correct.
• E)Statements I,II,III,and IV are correct.

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Definitions:

Obligations

Duties or commitments that an individual or entity is legally or morally bound to perform.

Unanimously Vote

When all members of a decision-making body agree and vote in the same way on a particular issue.

Dismiss James

This seems like a directive or specific action rather than a widely recognized key term. NO.

Partnership Agreement

A document that outlines the rights, responsibilities, and obligations of the partners in a business venture.