CDS Tax Implications of Divorce

Question 1

Under the Tax Cuts and Jobs Act (TCJA) of 2017, how is alimony treated for divorce agreements executed after December 31, 2018?

Accepted Answer

Not deductible by the payor and not taxable to the recipient

Answer

Deductible by the payor and taxable to the recipient

Answer

Taxable to the payor and deductible by the recipient

Answer

Deductible by both parties equally

Question 2

For a divorce agreement executed in 2016, how is alimony taxed under pre-TCJA rules?

Accepted Answer

Deductible by the payor and taxable to the recipient

Answer

Deductible by the payor, not taxable to the recipient

Answer

Not deductible by the payor, taxable to the recipient

Answer

Not deductible or taxable by either party

Question 3

Under IRC Section 1041, what is the tax consequence when one spouse transfers appreciated property to the other spouse incident to divorce?

Accepted Answer

No gain or loss is recognized by the transferor

Answer

The transferor recognizes capital gains on the appreciation

Answer

The transferee pays gift tax on the fair market value

Answer

The transfer triggers ordinary income tax for the transferee

Question 4

When property is transferred between divorcing spouses under IRC Section 1041, what tax basis does the recipient (transferee) take in the property?

Accepted Answer

The transferor's adjusted basis (carryover basis)

Answer

Fair market value at the time of transfer

Answer

Zero basis

Answer

The average of fair market value and the transferor's basis

Question 5

Which IRS filing status can a custodial parent use in the year of divorce if they paid more than half the home costs and the child lived there more than half the year?

Accepted Answer

Head of Household

Answer

Married Filing Jointly

Answer

Single

Answer

Qualifying Widow(er)

Question 6

Under the TCJA, who is generally entitled to claim the child dependency exemption after divorce?

Accepted Answer

The custodial parent by default

Answer

The non-custodial parent by default

Answer

The higher-earning parent

Answer

The parent who pays child support

Question 7

A non-custodial parent wishes to claim the child as a dependent. What IRS form must the custodial parent sign to release the dependency exemption?

Accepted Answer

Form 8332

Answer

Form 2120

Answer

Form 1099-DIV

Answer

Form 4506-T