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:

Obsessive-Compulsive Disorder

A mental health disorder marked by unwanted, repetitive thoughts (obsessions) and behaviors (compulsions) that one feels the urge to perform.

Antisocial Personality

A long-standing mental disorder where there's consistent neglect or breach of others' rights.

Major Depressive Disorder

A clinical condition characterized by persistent and intense feelings of sadness or despair, lack of interest in activities, and several other physical and cognitive symptoms, impacting daily life.

Bipolar Disorder

A mental disorder marked by significant mood swings, including depressive lows and manic highs.