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Casper and Cecile divorced in 2018. As part of the divorce settlement, Casper transferred stock to Cecile. Casper purchased the stock for $25,000, and it had a market value of $43,000 on the date of the transfer. Cecile sold the stock for $40,000 a month after receiving it. In addition, Casper is required to pay Cecile $1,500 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?

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Answer:

According to IRS, the party making the payments is entitled to cancel the alimony & separate maintenance fees in a divorce situation while the party accepting the payment is obliged to include the amounts received in their gross revenue. Any transfer of property in respect of a divorce other than cash, however, is not taxable.The party receiving the property also does not recognize income and include the item on cost basis equal to basis of the party making transfer.

Explanation:

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