Question

luke and mara divorced in 2018. under the terms of the decree, luke pays mara $50,000 in cash in each of the next five years (or until mara's death or remarriage). in addition, luke transferred a castle worth $2,000,000 to mara in 2018 and will pay $12,000 per year to support their son, ben, until he turns 19 years old. what amount (if any) is included in mara's gross income in 2022?

Answer 1

Mara's gross income in 2022 likely does not include the annual cash payments of $50,000 or the value of the castle, as these are part of a property settlement in a post-2018 divorce, and the $12,000 for child support is also not included in gross income.

Step-by-step explanation:

To determine what amount is included in Mara's gross income in 2022, we need to understand how different types of payments are treated under tax law. Alimony payments made under divorce decrees executed after December 31, 2018, are no longer deductible by the payor or includable in the income of the recipient, per the changes enacted by the Tax Cuts and Jobs Act of 2017.

However, if the payments qualify as child support, they would not be included in Mara's gross income. Since the divorce was in 2018, and child support does not count towards gross income, the $12,000 per year paid for their son Ben's support is not included in Mara's income. The lump-sum cash payments of $50,000 each year could be considered as part of the property settlement and therefore not included in gross income if the cash was intended as part of the property division.

The transfer of the castle as part of the property settlement also does not count as income. Therefore, it is likely that Mara's gross income does not include the annual cash payments or the value of the castle received in 2018. However, exact treatment can depend on the specific language in the divorce decree, and consulting with a tax professional is recommended for precise determination.