Question

28. Thelma and Mitch were divorced in 2018. The couple had a joint brokerage account that included stocks with a basis of $600,000 and a fair market value of S1,000,000. Under the terms of the divorce agreement, Mitch would receive the stocks and Mitch would pay Thelma $100,000 each year for six years, or until Thelma's death, whichever should occur first. Thelma and Mitch lived apart when the payments were made by Mitch. He paid the $600,000 to Thelma over the six-year period. The divorce agreement did not contain the word "alimony." Then, Mitch sold thé stocks for $1,300,000. Mitch's recognized gain from the sale is: a. S-0 gho the lev b.$1,000,000 (S1,300,000-$300,000). c. $700,000 ($1,300,000-$600,000). 1.$300,000 ($1,300,000-$1,000,000). 000 e. None of these.

Answer 1

The correct option is (c) - $700000 ($1300000-$600000)

​​​​​- Mitch sold the stock for = $1300000

(-) His Basis of stock = ($600000)

Gain on sale recognized = $700000

- Mitch basis of stock became the same as the couples basis of $600000 ($100000×6).

​​​​​​______×______

ALL THE BEST,

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