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Dick and Jane Are Divorced in 2017

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Essay

Dick and Jane are divorced in 2017. At the time of the divorce, Dick had a lawsuit pending. He had filed suit against a former employer for overtime pay. As part of a divorce agreement, Dick agreed to pay Jane one-half of the proceeds from the lawsuit. In 2018, Dick collected $250,000 from the former employer and paid Jane $125,000. What are the tax consequences for Dick receiving the $250,000 and then paying Jane the $125,000?


Definitions:

Bootstrapping

A business funding strategy where entrepreneurs use their own funding and resources to start and grow their businesses.

Zero Funding

A situation in which no financial resources are provided or available for a project, initiative, or enterprise.

Seed Startup

An early stage of a startup's development, typically financed by seed capital to prove a concept or launch the first product.

Crowdsourcing

The practice of obtaining information, ideas, or content by soliciting contributions from a large group of people, typically from the online community.

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