Bonnie and Howard got divorced in 2018. Under the terms of the decree Bonnie will pay Howard $100,000 in cash in each of the next ten years (or until Howard's death or remarriage). In addition, Bonnie will transfer a residence worth $2,000,000 to Howard and pay $30,000 per year to support their daughter, Kristina, until she turns 19 years old. What amount (if any) is included in Howard's gross income this year?

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Business

Diamond Lang

31 January, 04:48

Bonnie and Howard got divorced in 2018. Under the terms of the decree Bonnie will pay Howard $100,000 in cash in each of the next ten years (or until Howard's death or remarriage). In addition, Bonnie will transfer a residence worth $2,000,000 to Howard and pay $30,000 per year to support their daughter, Kristina, until she turns 19 years old. What amount (if any) is included in Howard's gross income this year?

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Answers (1)

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Makaila Merritt · Answer 1

The answer is: $100,000

Explanation:

Howard must include as gross income the $100,000 he receives from Bonnie as alimony payment. Bonnie can deduct the alimony she pays from her gross income statement.

The property settlement worth $2 million is not included in Howard's gross income and no taxable gain or loss is recognized either.

Neither Bonnie nor Howard should include child support payments in their gross income.