Question

Casper and Cecile divorced in 2018. As part of the divorce settlement, Casper transferred stock to Cecile. Casper purchased the stock for $185,000, and it had a market value of $296,000 on the date of the transfer. Cecile sold the stock for $259,000 a month after receiving it. In addition Casper is required to pay Cecile $9,250 a month in alimony. He made five payments to her during the year.

What are the tax consequences for Casper and Cecile regarding these transactions?

If an amount is zero, enter "$0".

a. How much gain or loss does Casper recognize on the transfer of the stock?
$

b. Does Casper receive a deduction for the $46,250 alimony paid?

c. How much income does Cecile have from the $46,250 alimony received?
$

d. When Cecile sells the stock, how much does she report?
Cecile will report a _____ of $. __

Answer 1

a	$0	Anything paid under alimony other than cash is not taxable
b	$46,250	Yes. Casper will receive a deduction for the $46,250 alimony paid. ($9250*5 = $46,250)
c	$46,250	The alimony received from Casper is included in Cecile’s gross income.
d	Cecile will report capital gains of $74,000. (259,000-185,000)
	The party making transfer is not entitled to a deduction for transferred property and doesn’t recognize any gain or loss on the transfer. The party receiving the property also doesn’t recognize income and include the item on cost basis equal to basis of the party making transfer.