
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question

Transcribed Image Text:Exercise 4-23 (Algorithmic) (LO. 4)
Casper and Cecile divorced in 2018. As part of the divorce settlement, Casper transferred stock to Cecile. Casper purchased the stock for
$130,000, and it had a market value of $208,000 on the date of the transfer. Cecile sold the stock for $182,000 a month after receiving it.
In addition Casper is required to pay Cecile $6,500 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 $32,500 alimony paid?
c. How much income does Cecile have from the $32,500 alimony received?
$4
d. When Cecile sells the stock, how much does she report?
Cecile will report a
of $
Expert Solution

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution
Trending nowThis is a popular solution!
Step by stepSolved in 2 steps

Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Sean sells land to Eli, his brother, for the fair market value of $39,000. Six months later when the land is worth $45,000, Eli sells the property to his son, Jon, without gift tax. His son sells the land for $47,000. Sean’s adjusted basis for the land is $24,000 what is Jon’s recognized gain or loss on the sales?arrow_forwardAlfred owned a term life insurance policy at the time he was diagnosed with a terminal illness. After paying $18,300 in premiums, he sold the policy to a company that is authorized by the state of South Carolina to purchase such policies. The company paid Alfred $125,000. When Alfred died 18 months later, the company collected the face amount of the policy, $150,000. As a result of the sale of the policy, how much is Alfred required to include in his gross income?arrow_forwardGary receives $40,000 worth of Quantro, Inc., common stock from his late grandmother's estate. Early in the year, he receives a $100 cash dividend. Four months later, he received a 2% stock dividend. Near the end of the year, Gary sells the stock for $42,000. Due to these events only, how much must Gary include in his gross income for the year?arrow_forward
- Camille Sikorski was divorced in 2018. She currently provides a home for her 15-year-old daughter Kaly. Kaly lived in Camille's home for the entire year, and Camille paid for all the costs of maintaining the home. Camille received a salary of $95,000 and contributed $5,800 of it to a qualified retirement account (a for AGI deduction). She also received $14,000 of alimony from her former husband (per divorce decree issued in 2018). Finally, Camille paid $16,900 of expenditures that qualified as itemized deductions, including a $1,000 donation to United Way (a public charity). Assume the nonitemizer charitable contribution deduction is extended to 2022. (Use the tax rate schedules and 2022 rules.) c. Assume the original facts but now suppose Camille's daughter, Kaly, is 25 years old and a full-time student. Kaly's gross income for the year was $6,900. Kaly provided $4,140 of her own support, and Camille provided $6,900 of support. What is Camille's taxable income?arrow_forwardAs a result of their divorce, Eric agreed to pay alimony to Tammy of $20,000 per year. The payments are to cease in the event of Fric's or Tammy's death or in the event of Tammy's remarriage. The alimony is not tied to their daughter with any conditions. In addition, Tammy is to receive their residence, which cost them $100,000 but is worth $140,000. a) How will the $20,000 payments be treated by Eric and Tammy if the divorce was finalized in 2018? b) How will the $ 20,000 payments be treated by Eric and Tammy if the divorce was finalized in 2019? c) Assume the alimony was tied to a condition surrounding their daughter. This condition states that once their daughter turns 18, the payments to Tammy drop by $12,000 per year. If all other conditions surrounding the payments remain true, how would the payments be treated assuming their divorce was finalized in 2018? In 2019?arrow_forwardRaphael and Martina are engaged and are planning to travel to Las Vegas during the 2018 Christmas season and get married around the end of the year. In 2018, Raphael expects to earn $58,600 and Martina expects to earn $23,500. Their employers have deducted the appropriate amount of withholding from their paychecks throughout the year. Neither Raphael nor Martina has any itemized deductions. They are trying to decide whether they should get married on December 31, 2018, or on January 1, 2019. What do you recommend?arrow_forward
- This year Diane intends to file a married-joint return. Diane received $179,700 of salary and paid $8,350 of interest on loans used to pay qualified tuition costs for her dependent daughter, Deb. This year Diane has also paid moving expenses of $5,100 and $29,400 of alimony to her ex-spouse, Jack, who she divorced in 2012. Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. a. What is Diane's adjusted gross income? b. Suppose that Diane also reported income of $12,850 from a half share of profits from a partnership. Disregard any potential self-employment taxes on this income. What AGI would Diane report under these circumstances?arrow_forwardCarol and Bob’s divorce became final in 2017. Each month, Bob is required by the divorce decree to pay $3,000, of which $1,800 is stated as child support. This year, Bob has paid only $2,200 each month. What is the amount of Bob’s alimony deduction and the alimony income Carol must report this year? Group of answer choices $36,000 $14,400 $26,400 $4,800arrow_forwardMarc and Michelle are married and earned salaries this year of $65,600 and $12,600, respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $700 from corporate bonds. Marc contributed $2,700 to a traditional individual retirement account, and Marc paid alimony to a prior spouse in the amount of $1,700 (under a divorce decree effective June 1, 2006). Marc and Michelle have a 10-year-old son, Matthew, who lived with them throughout the entire year. Thus, Marc and Michelle are allowed to claim a $3,000 child tax credit for Matthew. Marc and Michelle paid $6,400 of expenditures that qualify as itemized deductions (no charitable contributions) and they had a total of $3,105 in federal income taxes withheld from their paychecks during the year. What is the total amount of Marc and Michelle’s deductions from AGI?arrow_forward
- For the last 10 years, you prepared the joint tax returns for Dominic (husband; age 40) and Dulce (wife; age 35) Divorcio. Last year they got a divorce and remained as your separate tax clients. Under the dissolution decree, Dominic has to pay Dulce $2,500 per month alimony, which he does for the current year. You have completed Dominic’s tax return for the current year and you deducted the required alimony payments to Dulce on Dominic’s Form 1040. Dulce came in to have you prepare her tax return and refused to report her alimony received as income. She stated, “I am not going to pay tax on the $30,000 from Dominic.” She views the payments as “a gift for putting up with him for all those years of marriage.” Dulce will not budge on excluding this alimony from income. Would you sign the Paid Preparer’s declaration (see example above) on this return? Why or why not?arrow_forwardAlison and her husband, Tyrone, were married at the beginning of 2021. They separated on July 5, 2021, and Tyrone moved out of the house at that time. Their son, Cam (9), lived with Alison all year. Alison paid more than half of the total cost of keeping up the home in 2021. Alison and Tyrone's divorce was finalized on January 3, 2022. Alison does not wish to file a joint return with Tyrone. What is Alison's most advantageous 2021 filing status and standard deduction? Qualifying widow(er); $25,100. Head of household; $18,800. Married filing separately; $12,550. Single; $12,550.arrow_forwardAmanda and George are married filing jointly. For 2022, they have the following: 46,000 Salary Tips 11,000 Cash gift from George's mom 13,000 Alimony from Amanda's x-husband* 8,000 12,000 Income from illegal weapons sales Itemized deductions (25,000) Long-term capital loss (1,000) *Divorce agreement was executed on June 5, 2019. Please calculate their taxable income.arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education


Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,

Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON

Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education

Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education