Alimony Tax Question

Accounting
Tutor: None Selected Time limit: 1 Day

48. Under the terms of a divorce decree executed May 1, 2014, Ahmed transferred a house worth $650,000 to his ex-wife, Farah, and was to make alimony payments of $3,000 per month. The property has a tax basis to Ahmed of $300,000.

a. How much of this must be reported on Farah's tax return?


b. Of that amount, how much is taxable gain or loss that Farah must recognize related to the transfer of the house?

Jul 9th, 2015

Thank you for the opportunity to help you with your question!

Note that alimony is taxable when it is paid in cash. Therefore the house transfer is NONtaxable and is not reported on the tax return.


a. Only the alimony payments need to be reported. Therefore 12 x $3,000 = $36,000

b. The house transfer is nontaxable. Thus there is no taxable gain/loss.

Please let me know if you need any clarification. I'm always happy to answer your questions.
Jul 9th, 2015

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