Tim and Janet Were Divorced

question 61

Multiple Choice

Tim and Janet were divorced. 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 Janet would pay Tim $15,000 each year for 5 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 the above 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.