Question

Research the tax treatment for each of the following income items:

7.  Divorce payments: Alimony vs. Child Support vs. Property Division

10. Consulting income

11. Non-cash transactions (barter systems)

Answer 1

Divorce Payments: Alimony

The person paying alimony are tax deductible. But, payments received by former spouse are part of taxable deductable and form part of incme of the receiver.

Divorce Payments: Child Support

Payments made for welfare of child are not deductible for the payer but the same is treated as tax free income in hands of recipient.

Divorce Payments: Property Division

Transfers of property between former spouses in case of marriage dissolution are non taxable. However, the same is not applicable when the recipient is a non-resident.

Consulting Income

Firstly, one is to distinguish whether the said income is generated as an employee or as a self employed consultant, ie, working for multiple companies. Assuming the question is in context of self employed consulted then, the tax payer would be treated as  self-employed independent contractor in eyes of IRS.The IRS provides Form 1040-ES, Estimated Tax for Individuals to help you calculate quarterly tax payments.

Non-cash transactions (barter systems):

Bartering is exchange of products and services without any exchange of cash. In case of such scenarios the fair market value of such product /services aare to be reported as income of both parties.