Question

Travis and Andrea were divorced. Their only marital property consisted of a personal residence (fair market value of $400,000, cost of $200,000), and publicly-traded stocks (fair market value of $800,000, cost basis of $500,000). Under the terms of the divorce agreement, Andrea received the personal residence and Travis received the stocks. In addition, Andrea was to receive $50,000 for eight years. If Andrea dies during this time, then the payments will be paid to her estate. If the $50.000 annual payments are to be made to Andrea or her estate
(f she dies before the end of the eight years), the payments will qualify as alimony
ll. Andrea recognizes ali ony income from cash payments received
III Travis may not deduc any alimony payments

A. Only IIl is true.
B. Only I and IIl are true.
C. Only 1 and 11 are true
D. I, II, and III are true
E. None of the above are true

Answer 1

Answer:

As per our research the complete question is

Travis and Andrea were divorced. Their only marital property consisted of a personal residence (fair market valueof $400,000, cost of $200,000), and publicly-traded stocks (fair market value of $800,000, cost basis of $500,000).Under the terms of the divorce agreement, Andrea received the personal residence and Travis received the stocks.In addition, Andrea was to receive $50,000 for eight years.I.If the $50,000 annual payments are to be made to Andrea or her estate (if she diesbefore the end of the eight years), the payments will qualify as alimony.II.Andrea has a taxable gain from an exchange of her one-half interest in the stocks for Travis’ onehalf interest in the house and cash.III.If Travis sells the stocks for $900,000, he must recognize a $400,000 gain.a. Only III is true.b. Only I and III are true.c. Only I and II are true.d. I, II, and III are true.e. None of these are true.

Corrects answer is A. Only III is true.

Logic:

To qualify as alimony, the cash payments must cease upon the death of the payee; therefore, option I is incorrect. The basis of the marital property received by a former spouse is the same as the former married couple’s basis.

Therefore, Travis’ basis in the stocks was $500,000, and when they were sold, Travisrecognized a $400,000 gain (option III).