Not understanding child support question

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  • #199416
    Anonymous
    Inactive

    NINJA Question –

    John and Mary were divorced in 2014. The divorce decree provides that John pay alimony of $10,000 per year, to be reduced by 20% on their child’s 18th birthday. Their child turned age 18 during 2015. During 2015, 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 2015 income tax return?

    A.

    $5,600

    Correct B.

    $8,000

    C.

    $8,600

    D.

    $10,000

    You are correct, the answer is B.

    $10,000 total payment to Mary

    – 2,000 (20% x $10,000) child support


    $ 8,000 alimony

    =======

    Since the divorce decree reduced the payment by 20% to Mary based upon their child’s reaching 18 years of age, that portion of the payment represents child support.

    Even though John paid $7,000 to Mary and $3,000 to Spring College for Mary’s tuition, only $8,000 is alimony and $2,000 is child support.

    If any amount specified in a divorce decree is to be reduced based on any contingency which relates to a child (such as attaining a specific age, dying, leaving school, or marrying) that amount of the specific reduction is treated as child support from the beginning.

    I’m not sure if I get this question. It appears that John’s alimony obligation in 2015 is $8,000. However he pays $7,000 to her and pays $3,000 for his wife’s college? How is paying for his wife’s college considered child support?

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  • #754250
    Missy
    Participant

    Don't let the fact of who he paid money to confuse you. For all practical purposes, he paid her $10k but instead of writing one check he made one to her and one to a college but he still paid $10k. Alimony=taxable anything over and above the court ordered alimony is non taxable and deemed “child support” for taxability purposes.

    Licensed Massachusetts Non Reporting CPA since 2012
    Finance/Admin/HR Manager

    #754251
    Anonymous
    Inactive

    Just to restate to make sure I understand.

    Alimony = only things stated in the divorcee decree as Alimony

    Child Support = Everything else

    ? yeah?

    #754252
    Tripin93
    Participant

    I learned from Becker that child support is always calculated FIRST. Any remaining is allocated to alimony. In the Becker lectures, to help people remember they say “don't be a deadbeat dad,” meaning that the child support must be a top priority.

    And it doesn't matter where the money was paid or how it was used. For tax purposes, child support is 100% of the amount stated in the decree (or if underpaid, the amount paid.)

    For example, assume the divorce decree says that child support is 8k and alimony is 20k. During the year the man underpays and only paid 14k. For tax purposes, consider child support to equal 8k and alimony 6k.

    For another example, assume the divorce decree says that child support is 8k and alimony is 20k. During the year the man underpays and only paid 5k. For tax purposes, consider child support to equal 5k and alimony 0.

    Motivated by JC. I do it to make God proud.

    FAR: 91 July 2015
    AUD: 83 October 2015
    REG: 81 January 2016
    BEC: 83 February 2016

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