Question

Casper and Cecile divorced in 2018. As part of the divorce settlement, Casper transferred stock to Cecile. Casper purchased the stock for $40,000, and it had a market value of $64,000 on the date of the transfer. Cecile sold the stock for $56,000 a month after receiving it. In addition Casper is required to pay Cecile $2,000 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 $10,000 alimony paid?

c. How much income does Cecile have from the $10,000 alimony received? $

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

Answer 1

a. No gain or loss shall be recognized on the transfer of stock by Casper as no gain or loss is recognized on transfer.

b. Since Casper is making alimony payments which are included in Cecile's gross income, he is allowed to make a deduction for $10000 of the alimony paid.

c. Cecile has entire $10000 as income of the alimony received.

d. Cecile needs to report entire recognized capital gain as the stocks were transferred on cost basis. The amount needed to be reported=$56000-$40000=$16000