Question

Problem 2-32
Alimony (LO 2.3)

Jennifer divorced Ben in 2015. As part of negotiating the divorce settlement, Ben was to get the house worth $100,000 and alimony of $10,000 per year. Jennifer wanted to keep the house as it was close to her work and also had sentimental value so she offered to instead pay Ben alimony $60,000 in 2015, $60,000 in 2016, and $10,000 in 2017. Go to the IRS website (www.irs.gov) and print out Worksheet 1. Recapture of Alimonyfrom IRS Publication 504.

Complete the worksheet to determine how much income Jennifer must recapture in 2017.

Worksheet 1. Recapture of Alimony Keep for Your Records ✎

Note. Do not enter less than -0- on any line. 1. Alimony paid in 2nd year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. $ 2. Alimony paid in 3rd year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. $ 3. Floor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. $15,000 4. Add lines 2 and 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. $ 5. Subtract line 4 from line 1. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. $ 6. Alimony paid in 1st year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. $ 7. Adjusted alimony paid in 2nd year (line 1 minus line 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. $ 8. Alimony paid in 3rd year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. $ 9. Add lines 7 and 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. $ 10. Divide line 9 by 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. $ 11. Floor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. $15,000 12. Add lines 10 and 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. $ 13. Subtract line 12 from line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. $ 14. Recaptured alimony. Add lines 5 and 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. $

Answer 1

The recapture of alimony is applicable only in the following cases

·         alimony payments decrease substantially or end during the first three calendar years

·         the first post separation three years are taken into account

Recapture in the context of alimony is to give back or to adjust for a tax benefit that was improperly taken

The following information is given alimony in case of Jennifer divorced Ben

·         the first year alimony is $60,000

·         the second year alimony is $60,000

·         the third year alimony is $10,000

The calculation of worksheet to determine how much income Jennifer must recapture in 2017. Is as under

Worksheet 1. Recapture of Alimony					Keep your records
Note.Do not enter less than -0- on any line.
1	Alimony paid in 2nd year			1	60000
2	Alimony paid in 3rd year	2			10000
3	Floor	3	$15,000
4	Add lines 2 and 3			4	$25,000
5	Subtract line 4 from line 1					5	$35,000
6	Alimony paid in 1st year			6			60000
7	Adjusted alimony paid in 2nd year	7					$25,000
	(line 1 less line 5)
8	Alimony paid in 3rd year	8					10000
9	Add lines 7 and 8	9					$35,000
10	Divide line 9 by 2	10					$17,500
11	Floor	11	$15,000
12	Add lines 10 and 11			12			$32,500
13	Subtract line 12 from line 6					13	$27,500
14	Recaptured alimony. Add lines 5 and 13					*14.	$62,500

The amount of recaptured alimony of $62,500 will report this amount as income on Form 1040, line 11. By jenniffer . the reason for this amount being shown as income in 2017 is because amounts paid as a part of a property settlement are not deductible