Question

Ted and Alice were divorced in 2018. Under the terms of the divorce, alice recieved certain stocks that ted had purchased before their marriage. His cost of the stock was $10,000 and the fair market value on the date alice recieved the stock was $25,000. Alice also was to recieve $1,000 each month for ten years. If alice died before the end of 10 years, the balance of the payments would be made to her estate. Ted was ordered to pay support for the one minor child they had together of $2000 per month until the child turns 21. In 2018, Alice sold the stock for $23,000, collected $12,000 under the agreement for monthly payments, and $24,000 for the child support. What is Alice's gross income for 2018?

Answer 1

Alice would pay capital gain on sale of stock

Value of Stock

$23,000

Adjusted Basis of Stock

$10,000

Capital Gains

$13,000

$12000 provided by Ted are not in the form of alimony as the same would be continued to be paid even when Alice dies, Hence it will not be included in the gross income

As per IRS, child support is not taxable and not deductible, hence the same will not be included in the gross income