Question

Clarence and Victoria were divorced in 2014. Clarence was ordered to pay Victoria $12,000 a year in alimony. How is the alimony reported on each of their 2020 tax return?

a. Clarence claims $12,000 as an adjustment to income and Victoria reports $12,000 as income

b. Clarence claims $12,000 as an adjustment to income and Victoria does not report the alimony she received

c. Clarence reports $12,000 as income and Victoria reports $12,000 as an adjustment to income

d. Clarence does not report the alimony on his return and Victoria reports $12,000 as income

Answer 1

Taxability of the alimony in the hands on recipient is completely depends on whether the amount is receive is lumpsum or periodocal.. if the amount is received as lumpsum it will be considered as capital receipt, hence the question of taxability doesn't arise on such receipt.. if the alimony is received as periodical amounts it will be considered as revenue receipts and it will be taxed

No deduction shall be allowed to the person paying alimony

Hence the answer to the question is D assuming the payment is periodical not lump sum