[Anonymous]

Becker Question –

John and Mary were divorced last year. The divorce decree provides that John pay alimony of $10,000 per year, to be reduced by 20% on their child’s 18th birthday. During the current year, John paid $7,000 directly to Mary and $3,000 to Spring College for Mary’s tuition. What amount of these payments should be reported as income in Mary’s current year income tax return?

a. $5,600

b. $10,000

c. $8,000

d. $8,600

The correct answer is c. How do we know that the child actually turned 18 in the current year?

[Anonymous]

The child is not 18 yet. The question says that when the child turns 18, the alimony will be reduced by 20%. Since 20% of 10,000 is 2,000, the taxable portion is $8,000. This is because child support is never income and payments directly to college for tuition is never income either. I believe it the child turned 18 it would be explicitly stated.

[Anonymous]

The child is not 18 yet. The question says that when the child turns 18, the alimony will be reduced by 20%. Since 20% of 10,000 is 2,000, the taxable portion is $8,000. This is because child support is never income and payments directly to college for tuition is never income either. I believe it the child turned 18 it would be explicitly stated.

[Anonymous]

Thank you Birds! For some reason, I always thought that alimony and child support are mutually exclusive. I didn't realize that when a question mentions “alimony payments”, it is possible for child support to fall under the umbrella.

[Anonymous]

Thank you Birds! For some reason, I always thought that alimony and child support are mutually exclusive. I didn't realize that when a question mentions “alimony payments”, it is possible for child support to fall under the umbrella.

[Author]

Replies