[Isaac]

Can someone please help me understand this. I need someone to explain it in “5-year old” language.

Jack and Jill were divorced in 2009. Under the terms of their divorce decree, Jack paid alimony to Jill at the rate of $60,000 in 2009, $25,000 in 2010, and nothing in 2011. What amount of alimony recapture must be included in Jack’s gross income for 2011?

a. 37,500

b. 0

c. 10,000

d. 35,000

Thank you in advance. I just simply cannot get my brain to understand this.

FAR...80...Yaeger...Nov/2011
AUD...Exam...Oct/2012
REG
BEC

[Anonymous]

Alimony recapture is kinda tricky. Essentially, if I pay $60,000 alimony to my (fictitious) cheating ex-wife in Year 1, I would normally get to deduct that (and my ex has to include it in her income) providing that it meets the requirements of alimony (paid in cash, not a property settlement, terminable on death, not child support, ect.) Well, let's assume that my ex-wife finds a wealthy doc to marry midway through year 2, and I am off the hook for half the alimony in year 2 and all of the alimony that was to be paid in year 3. Well, the IRS figures that if your not getting screwed by your ex-wife in alimony payments, they will finish the job for her. The idea is that because the alimony paid “dropped” rapidly within the first three years of a divorce settlement, you may be trying to hide a property settlement as a deductible expense. So, they “take away” some of the deductible benefit of alimony. Alimony recapture is:

*Y2 Recapture: (Y2 Alimony – Y3 Alimony)-$15,000

= ($25,000 – $0) – $15,000 = $10,000

*Y1 Recapture: Y1 Alimony – ((Y2 Alimony – Y2 Recapture + Y3 Alimony)/2) + $15,000

=$60,000 (($25,000-$10,000 + $0)/2) + $15,000

=$27,500

Total Recapture = $37,500

Obviously, the Y1 recapture is the most complicated to calculate,

[Isaac]

Thank you @chromatic. haha Thanks for the laugh and the information. Seriously though, you really helped me understand this better. The two formulas you wrote are much clearer than the ones in my book.

FAR...80...Yaeger...Nov/2011
AUD...Exam...Oct/2012
REG
BEC

[Anonymous]

I have Becker, and I don't see any alimony calculation at all in my book!!! Is it an important topic? Becker just mentioned Alimony should be included as income and deducted to arrive AGI. Also the treatment between Alimony and Child Support…it never goes into this details……:-(

[Anonymous]

It was on the SEE exam (Enrolled Agent) and I expect to see it on my REG. I'll be disappointed if I don't, once you know it, you know it and it is easy.

[HustlinHustlin]

I'm with you convertible, I saw this question and freaked out because there is nothing about alimony recapture at all in Becker. Ahh! Great explanation though.

B 71 - 79 EXPIRED
A 69 - 75 EXPIRED
R 65 - 48 - 45
F 56 - 61 - 65 - 64

Becker, Wiley Test Bank, Wiley Text and Ninja Notes

"The fish who keeps on swimming is the first to chill upstream" -311

Experience - Done, like WAAAY done.
Still need 30 more credits, in basket weaving (gotta love new CA requirements)

[Anonymous]

Hence the reason that I believe the $40 per part Wiley is far superior to Becker or CPAExcel (my only frames of reference having used them). I want all the information I need to pass, not someone's interpretation of what might be on the exam.

I have used Wiley for AUD and BEC and not one question, except for two auditing SIMS (oddly enough both were on the same topic) were not covered in Wiley adequately.

This time I think I screwed myself up by studying business law on CPAExcel. I've taken the notes but there are never prompts in the CPAEXcel book to tell you when to do mcq's or which mcq's to do. I like that about Wiley. So we will see how well CPAExcel did preparing me—I do know from the couple of sections I parused, there were a lot of business law topics in Wiley that weren't in CPAExcel. That bothers me.

All this time and money spent on these boards worrying about whether this course or that course will give you everything and it all can be had for $40 a section. It's a lot of work going through Wiley, that's for sure.

[mena je twa]

I took regulation 4 times, never once saw the alimony recapture question…. Just understand the basic alimony rules, you will be just fine.

Licensed CPA, Texas - 2012

[Anonymous]

@CPApending. I hope you will be disappointed. LOL. really. I am not going to study this unless Becker covers it…I have already had my brain full of exception, deduction, and perfections…:-)

[Anonymous]

I'm hoping that I'M RIGHT! 😀

I'd love to hear from someone on how the CPA exam does the different phase outs. On the EA (SEE exam), it was either provided to you in the question or the question gave you facts that clearly indicate that the taxpayer was completely phased out or never would reach the lower end of the phase out. i.e. AGI was $500,000 when the phase out ended at $169,000.

I cannot possibly memorize all of the different phase outs.

[Anonymous]

@CPApening…Becker instructor told us, no need to memorize those phase out, just remember which items require phase out. It appears we don't need to learn how to calculate those things either…someone please correct me if I am wrong!

[Anonymous]

I'm a little freaked out, I'm taking notes on everything that I think matters but when doing the MCQ's they can only cover so much. So I just see potential ghouls of potential untested information like that kid on ‘The Sixth Sense' sees dead people.

I'm in much better shape so I think I will be okay. If I can stick somewhat to schedule I will have time to go over the mcq's 3x each before 5/29. That should be enough.

Man, if after everything this past month, I pass this thing I will be in hog heaven. People at work have written this exam off after my Mom's passing at Easter and some insane hours I've been working on special projects at work. If I can stick this landing, I'll be walking around with my chest stuck out just a little (and thanking the Lord). I'm not a prideful person but persevering through all that and passing will be a major feat.

[Author]

Replies