Tax Implications of Special Circumstances - Sample Questions 1 - 6

1. Which of the following would qualify as alimony payments to an ex-spouse if directed by the divorce decree?

I. Payment of the rent for the ex-spouse.
II. Payment of life insurance premiums on a policy owned by the ex-spouse, but on the life of the payer.
III. Payment of SUV payments for a truck owned by the payer, but being used by the ex-spouse.
IV. Payment of mortgage payments for a house owned by the payer, where the ex-spouse is living in the home.

A) I only
I and II only
I, II and III
D) I, II, III and IV

2. Which of the following is a TRUE statement?

A) Child support received is taxable to the recipient.
Separated parents can file a joint return and claim the alimony deduction.
Child support payments are non-deductible.
D) Alimony is non-taxable to the recipient.

3. A divorce and separation agreement instructs Tammy to give her ex-husband (Jim) $200,000 worth of stock with a cost basis of $70,000. All of the following statements are false EXCEPT:

A) Jim will have a cost basis of $200,000 in the stock.
B) Tammy can deduct 50% or $100,000 as a loss on her tax return.
C) If Jim sells the stock in six months for $220,000, he will have a $150,000 gain.
If Jim sells the stock immediately and gets $200,000, he will have no gain.

4. Gus and Ingrid are getting a divorce, and they agreed amicably to split the IRA and 401(k) plan belonging to Gus in a 50/50 split arrangement. The proper court issued document to notify the plan administrator and IRA custodian of this ruling is which of the following:

A) Divorce decree
Order to distribute assets
Form 1099-R
D) Qualified Domestic Relations Order

5. All of the following are "Community Property" states EXCEPT:

A) Utah
B) Wisconsin
C) Idaho

6. Ronald and Rose (husband and wife), owned a jointly titled home together in a common law state. They paid $80,000 for the home, and made $10,000 in capital improvements over the years. Ronald dies and Rose is now left with maintaining the home. The FMV of the home at Ronald's death was $400,000. What is Rose's new adjusted cost basis in the home?

A) $90,000
D) $400,000

What would be the answer if they lived in California (a community property state)?

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