Question

Question a.

Jack and his partner, Sally, separated 5 years ago. The written separation agreement requires Jack to make payments for the maintenance of Sally and their child. Payments were set at $250 per month for Sally and $150 per month for their child. In the current year Jack’s payments totaled $4,000. How much of the current year payments can Jack deduct on his current year personal tax return?

	$2,200
	$1,800
	$3,000
	$4,000

Question b.

With respect to moving expenses, an eligible relocation would include moving to a new work location to take up employment at that new location after being unemployed.

	True
	False

Answer 1

Question A:

Total Amount Paid by Jack = $4,000.

Child Support expenses = $150*12 = 1,800

Remaining payment will be considered as Alimony = $4,000 - $1,800 = $2,200

Deductible part of Alimony payment on Jack's personal return = $2,200.

Explanation for Deductible part of Alimony payment:

Tax Treatment of Alimony

Amounts paid to a spouse or a former spouse under a divorce or separation instrument (including a divorce decree, a separate maintenance decree, or a written separation agreement) may be alimony for federal tax purposes. Alimony is deductible by the payer spouse, and the recipient spouse must include it in income.

Alimony Requirements

A payment is alimony only if all the following requirements are met:

• The spouses don't file a joint return with each other;
• The payment is in cash (including checks or money orders);
• The payment is to or for a spouse or a former spouse made under a divorce or separation instrument;
• The divorce or separation instrument doesn't designate the payment as not alimony;
• The spouses aren't members of the same household when the payment is made (This requirement applies only if the spouses are legally separated under a decree of divorce or of separate maintenance.);
• There's no liability to make the payment (in cash or property) after the death of the recipient spouse; and
• The payment isn't treated as child support or a property settlement.

Payments Not Alimony

Not all payments under a divorce or separation instrument are alimony. Alimony doesn't include:

• Child support,
• Noncash property settlements, whether in a lump-sum or installments,
• Payments that are your spouse's part of community property income,
• Payments to keep up the payer's property,
• Use of the payer's property, or
• Voluntary payments (that is, payments not required by a divorce or separation instrument).

Child support is never deductible and isn't considered income. Additionally, if a divorce or separation instrument provides for alimony and child support, and the payer spouse pays less than the total required, the payments apply to child support first. Only the remaining amount is considered alimony.

Question B:

Moving expenses can no longer be deducted.