Answer:
As per our research the complete question is
Travis and Andrea were divorced. Their only marital property consisted of a personal residence (fair market valueof $400,000, cost of $200,000), and publicly-traded stocks (fair market value of $800,000, cost basis of $500,000).Under the terms of the divorce agreement, Andrea received the personal residence and Travis received the stocks.In addition, Andrea was to receive $50,000 for eight years.I.If the $50,000 annual payments are to be made to Andrea or her estate (if she diesbefore the end of the eight years), the payments will qualify as alimony.II.Andrea has a taxable gain from an exchange of her one-half interest in the stocks for Travis’ onehalf interest in the house and cash.III.If Travis sells the stocks for $900,000, he must recognize a $400,000 gain.a. Only III is true.b. Only I and III are true.c. Only I and II are true.d. I, II, and III are true.e. None of these are true.
Corrects answer is A. Only III is true.
Logic:
To qualify as alimony, the cash payments must cease upon the death of the payee; therefore, option I is incorrect. The basis of the marital property received by a former spouse is the same as the former married couple’s basis.
Therefore, Travis’ basis in the stocks was $500,000, and when they were sold, Travisrecognized a $400,000 gain (option III).