CDS Financial Considerations in Divorce 3

Question 1

A spouse transfers the marital home to the other spouse as part of a divorce settlement. Under IRC Section 1041, this transfer is:

Accepted Answer

A non-recognition event with no gain or loss recognized

Answer

IRC Section 1041 treats transfers between spouses (or former spouses incident to divorce) as non-recognition events, deferring any gain.

Question 2

When calculating child support under income shares models, 'gross income' typically includes all of the following EXCEPT:

Accepted Answer

Welfare and TANF payments

Answer

Public assistance payments such as TANF and welfare benefits are generally excluded from gross income in child support calculations.

Question 3

A divorcing couple has a joint credit card debt of $20,000. If the divorce decree assigns the debt to Spouse A but Spouse A defaults, the creditor can:

Accepted Answer

Pursue either spouse since the creditor was not a party to the divorce decree

Answer

Creditors are not bound by divorce decrees; joint debt remains collectible from both parties regardless of which spouse was assigned responsibility.

Question 4

When a spouse receives a 529 college savings account in a divorce settlement, what is the primary financial planning concern?

Accepted Answer

Non-qualified withdrawals trigger income tax and a 10% penalty on earnings

Answer

If 529 funds are used for non-educational purposes, the earnings portion is subject to ordinary income tax plus a 10% federal penalty.

Question 5

In divorce financial planning, 'income imputation' refers to:

Accepted Answer

Attributing income to a spouse based on what they could earn if fully employed

Answer

Courts impute income to a voluntarily underemployed or unemployed spouse based on their education, work history, and prevailing wages.

(CDS) Certified Divorce Specialist Practice Test

(CDS) Certified Divorce Specialist Practice Test

CDS Financial Considerations in Divorce 3