Income Tax Mid Term
Punitive damage awards received because of a personal injury a. Are the same as loss-of-income damages. b. Are included in gross income regardless of the cause. c. Will be excluded from gross income if the award resulted from a physical personal injury. d. Will be excluded from gross income because punitive awards are meant to punish the offender for gross negligence. e. Are never taxable.
b. Are included in gross income regardless of the cause.
Deductions for adjusted gross income include I.Contribution to a Roth IRA. II. Contribution to conventional IRA a. Only statement I is correct. b. Only statement II is correct. c. Both statements are correct. d. Neither statement is correct.
b. Only statement II is correct.
"Active participation" and "real estate professional" are both exceptions to the general rule for passive activity losses with rental real estate. I. A taxpayer qualifying under both exceptions is limited to a maximum annual deduction of $25,000. II. Active participation results from owning at least a 10% interest in the activity and arranging for repairs and maintenance and collecting rents. a. Only statement I is correct. b. Only statement II is correct. c. Both statements are correct. d. Neither statement is correct.
b. Only statement II is correct. (A real estate profession has no limit b/c its a business)
The calculation of an individual's income tax includes certain deductions for adjusted gross income. The following are examples of this class of deductions: I. Trade or business expenses II. Rental expenses III. Interest on student loans IV. Investment interest a. Statements I and II are correct. b. Statements I, II, and III are correct. c. Only statement I is correct. d. Only statement III is correct. e. Statements I, II, III, and IV are correct.
b. Statements I, II, and III are correct.
Conzo is injured in an accident while working at his job. He received $1,500 in worker's compensation benefits for 5 weeks of lost work. How much should Conzo report as gross income from the receipt of these benefits? a. $- 0 - b. $300 c. $750 d. $900 e. $1,500
a. $- 0 -
Hector and Nicole are retired. During the current year, they receive $11,000 from a qualified pension plan, $3,000 of dividends on common stock holdings, $6,000 of tax-exempt interest, and $10,000 of Social Security benefits. Hector and Nicole's adjusted gross income is: a. $14,000 b. $19,000 c. $24,000 d. $30,000
a. $14,000
Moonglow, Inc., purchases a group-term life insurance plan for all its employees. Harold receives $250,000 of insurance for the current year at a cost to the company of $2,500. The IRS Table of Premium values indicates that premiums are $1.08 annually per $1,000 of protection. How much gross income does Harold have from the purchase of the life insurance by Moonglow, Inc.? a. $216 b. $270 c. $2,000 d. $2,270 e. $2,500
a. $216
Sanford's employer has a qualified pension plan that allows employees to contribute up to 10% of their gross salaries to the plan. The employer matches the contribution at the rate of 50% of the employee's contribution. Sanford's current annual salary is $80,000. This is his only source of income. If he contributes the maximum amount to the pension plan, what is Sanford's gross income for the current year? a. $72,000 b. $76,000 c. $80,000 d. $84,000 e. $88,000
a. $72,000
During the current year, Terry has a short-term capital loss of $9,000 and a long-term capital gain of $3,000. Due to these transactions Terry reports a. A capital loss deduction of $3,000 and a loss carryforward of $3,000 b. A capital loss deduction of $3,000 and a loss carryforward of $6,000. c. A capital loss deduction of $9,000. d. A capital gain of $3,000 and a loss carryforward of $9,000. e. A capital loss deduction of $6,000
a. A capital loss deduction of $3,000 and a loss carryforward of $3,000
The allowance of deductions in calculating taxable income and the use of a progressive tax rate structure are a direct application of the a. Ability to Pay Concept. b. Administrative Convenience Concept. c. Arm's-Length Transaction Concept. d. Capital Recovery Concept.
a. Ability to Pay Concept.
Victor receives a $2,000 tax credit for childcare. The credit was earned because of Victor's expenditures for daycare for his son while Victor worked. What concept, construct, or doctrine helps explain why Victor receives this tax credit? a. Ability to Pay Concept. b. Administrative Convenience Concept. c. Arm's-Length Transaction Concept. d. Capital Recovery Concept. e. Pay-as-You-Go Concept.
a. Ability to Pay Concept.
Allowing individuals to deduct a standard deduction amount in lieu of itemizing their allowable personal deductions is an application of the: a. Administrative Convenience Concept. b. Wherewithal-to-Pay Concept. c. Annual Accounting Period Concept d. Capital Recovery Concept. e. Business Purpose Concept.
a. Administrative Convenience Concept.
During the current year, Walter invests $35,000 in each of two separate corporations. Each investment gives him a 20% ownership interest. Corporation X is a C corporation that has taxable income of $200,000 and pays dividends totaling $50,000. Corporation Z is an S corporation that has taxable income of $100,000 and pays $50,000 of dividends. As a result of these two investments, Walter I. Has $10,000 of taxable income from Corporation X. II. Has $10,000 of taxable income from Corporation Z. a. Only statement I is correct. b. Only statement II is correct. c. Both statements are correct. d. Neither statement is correct.
a. Only statement I is correct.
Sam coaches a little league baseball team. He makes 15 copies of the team's schedule to give to the players on his employer's copy machine. The cost of the copies is not income to Sam due to the a. Ability to Pay Concept. b. Administrative Convenience Concept. c. Arm's-Length Transaction Concept. d. Capital Recovery Concept. e. Pay-as-You-Go Concept.
b. Administrative Convenience Concept.
Rose has an adjusted gross income of $130,000. Not included in her adjusted gross income is a $15,000 loss from a passive activity. Which of the following statements regarding the effect of the passive loss on his adjusted gross income is/are correct? I. If the activity is rental real estate and Rose meets the real estate professional exception, she can deduct the $15,000 loss for adjusted gross income. II. If the activity is rental real estate and Rose is an active participant, she can deduct $5,000 of the loss for adjusted gross income. a. Only statement I is correct. b. Only statement II is correct. c. Both statements are correct. d. Neither statement is correct.
a. Only statement I is correct.
The wash sale provisions apply to which of the following? I. Jim bought 500 additional shares of Alfa Gamma stock for $4,000 on December 2, 2013. Jim owned 2,500 shares after that purchase. On December 26, 2013, Jim realizes a loss of $1,500 on the sale of 250 shares of Alfa Gamma stock. II. Calvin realizes a $8,000 loss on the December 29, 2013, sale of Sloan corporate bonds. Each bond has a face value of $1,000. He replaces the Sloan corporate bonds with the same number of Jackson corporate bonds, each with a face value of $1,000 on January 16, 2014. The Jackson bonds have a different interest rate and maturity date then the Sloan bonds but have the same bond rating (AAA). a. Only statement I is correct. b.Only statement II is correct. c.Both statements are correct. d.Neither statement is correct.
a. Only statement I is correct.
Which of the following statements is/are correct? I. There is a minimum allowable standard deduction from adjusted gross income of individuals. II. Corporations are allowed deductions from adjusted gross income. III. Corporations are allowed a standard deduction. IV. Personal exemptions of individuals are deductible for adjusted gross income. a. Only statement I is correct. b. Only statement II is correct. c. Statements II and IV are correct. d. Statements I and IV are correct. e. Statements I and III are correct.
a. Only statement I is correct.
The IRS has a penalty for underpayment of estimated taxes. This penalty exists because of which of the following concepts, constructs, or doctrines? a. Pay-As-You-Go. b. Tax Benefit Rule. c. Substance-Over-Form. d. Administrative Convenience. e. Ability-To-Pay.
a. Pay-As-You-Go.
Nellie, a single individual age 77, receives Social Security benefits of $7,000 during the current year. Her only other income consists of $5,000 of interest from bank CDs and $1,000 of tax exempt interest distributed from a trust fund. Nellie's gross income is: a. $ - 0 - b. $ 5,000 c. $ 8,500 d. $12,000 e. $13,000
b. $ 5,000
How much gross income does Ron have from the following items of economic income? 1- Received cash gift of $5,000 from parents. 2- Received $12,000 in alimony payments 3 - Received $6,000 in child support from former spouse. 4 - Won $4,000 in Indiana lottery scratch off game. 5 - Investment in IBM stock increased in value by $15,000. 6 - Collected $12,000 in unemployment benefits. a. $16,000 b. $28,000 c. $33,000 d. $34,000 e. $54,000
b. $28,000 (1 - gift = no tax to recepient; 2 - counts; 3 - doesn't count; 4 - counts; 5 - unrealized; 6 - counts)
When items of income are omitted because the cost of the time and effort of the taxpayer to accumulate the information, it is an application of the a. Ability to Pay Concept. b. Administrative Convenience Concept. c. Arm's-Length Transaction Concept. d. Capital Recovery Concept. e. Pay-as-You-Go Concept.
b. Administrative Convenience Concept.
The term "tax law" as used in your textbook includes I. Treasury regulations. II. College textbooks (i.e. "Concepts in Federal Income Taxes"). III. Internal Revenue Code of 1986. IV. Tax related decisions of a U.S. Circuit Court of Appeals. a. Only statement III is correct. b. Statements I, III, and IV are correct. c. Statements I and III are correct. d. Only statement II is correct. e. All four statements are correct
b. Statements I, III, and IV are correct.
****Karen owns a vacation home in Door County, Wisconsin. During the year, she rents it out for to weeks and uses it personally for three weeks. Her expenses directly related to renting out the property were utilities $300, and maid service $150. The portion of taxes allocable to the rental activity is $600 and revenue from the rental is $1,000. Karen will: a. report no income and deduct $50. b. report no income and deduct no rental expenses related to the vacation home. c. report income of $1,000 and deduct $450 of expenses for AGI. d. report income of $1,000 and $150 expenses from AGI. e. report income of $1,000 and deduct $1000 of expenses for AGI.
b. report no income and deduct no rental expenses related to the vacation home. *****(Not considered vacation home b/c rented less than 14 days)
Carmen purchased a business for $150,000 by investing $40,000 of her own funds and borrowing $110,000 from Local National Bank. Carmen signed the note payable as a personal guarantor. In the first year of operations the business had an operating loss of $120,000. During the second year, the business has an operating loss of $45,000. How much of the year two loss is deductible against Carmen's income from other business activities? Assume that Carmen materially participates in the business. a. $ - 0 - b. $ 15,000 c. $ 30,000 d. $ 45,000 e. $120,000
c. $ 30,000
Bowden is a single individual and has the following income (loss) for the current tax year: Salary $85,000 Dividends and interest 24,000 Actively managed rental property (23,000) What is Bowden's adjusted gross income for this year? a. $ 85,000 b. $ 86,000 c. $ 88,500 d. $ 89,500 e. $109,000
c. $ 88,500
Nancy is the owner of an apartment complex. She actively participates in the management of the building. During the current year, it generates a taxable loss of $27,000. Nancy's other sources of income are salary of $52,000 and interest of $21,000. What is Nancy's allowable loss from the apartment? a. $ - 0 - b. $18,000 c. $25,000 d. $27,000 e. None of the above.
c. $25,000 (Active participation in rental real estate --> up to $25,000 of rental real estate loss to be deducted annually)
How much gross income does Faith have from the following items of economic income? • Received cash gift of $6,000 from parents. • Received $12,000 in alimony payments from former spouse. • Received $18,000 in child support payments from former spouse. • Won $6,000 in a slot machine in Las Vegas. • Faith's vacation home on Lake Tahoe increased in value by $15,000. • Collected $14,000 in unemployment benefits. a. $18,000 b. $30,000 c. $32,000 d. $38,000 e. $50,000
c. $32,000
Marge, age 35, is an employee of Troy, Inc. Her annual salary is $50,000. After considering the following list of benefits provided Marge, determine her gross income for the year. • Marge has $2,000 of her salary withheld and paid into the company's qualified pension plan. The company matches the contribution at the rate of $.50 for each $1.00 paid in. • Group-term life insurance policy at twice her annual salary paid by the company. Premium cost is $1.08 per $1,000 of coverage. • Health and accident insurance policy costing $1,500 paid by the company. • Marge elects to have $1,800 of her salary paid into a flexible benefits plan to cover childcare costs. She incurs $2,100 of childcare costs during the year. a. $44,700 b. $44,754 c. $46,254 d. $48,054 e. $50,000
c. $46,254
Susan purchased a lot for investment purposes. She paid $10,000 for the lot. Three years later she sold the lot to her daughter for $8,000. Susan cannot deduct the loss due to a. Ability to Pay Concept. b. Administrative Convenience Concept. c. Arm's-Length Transaction Concept. d. Capital Recovery Concept. e. Pay-as-You-Go Concept.
c. Arm's-Length Transaction Concept.
The rules that limit self-dealing through the related party provisions is a result of the a. Ability to Pay Concept. b. Administrative Convenience Concept. c. Arm's-Length Transaction Concept. d. Capital Recovery Concept. e. Pay-as-You-Go Concept.
c. Arm's-Length Transaction Concept.
A passive activity I. includes any trade or business in which a taxpayer does not materially participate. II. includes rentals of apartment buildings, rental houses, etc., where no significant personal services are involved. a. Only statement I is correct. b. Only statement II is correct. c. Both statements are correct. d. Neither statement is correct.
c. Both statements are correct.
During the year, Aimee reports $30,000 of active business income, $15,000 of income from passive activity X, and a $25,000 loss from passive activity Y. Determine the tax consequences of these events. I. The $15,000 income from activity X can offset $15,000 of the loss from activity Y. II. Any passive loss that is not deducted in the current year is suspended. a. Only statement I is correct. b. Only statement II is correct. c. Both statements are correct. d. Neither statement is correct.
c. Both statements are correct.
Occasionally, realized gains are not recognized for tax purposes. These situations occur because I. certain gains are excluded due to legislative grace. II. gains are deferred on certain types of property transactions where the wherewithal-to pay the tax resulting from the transaction is lacking. a. Only statement I is correct. b. Only statement II is correct. c. Both statements are correct. d. Neither statement is correct.
c. Both statements are correct.
Tax planning involves the timing of income and deductions. General rules of thumb to follow when planning include I. putting income into the year with the lowest marginal tax rate. II. deferring recognition of income. a. Only statement I is correct. b. Only statement II is correct. c. Both statements are correct. d. Neither statements is correct.
c. Both statements are correct.
Income realization may occur as a result of I. Relief from a liability. II. Exchange of property. III. Payment of the taxpayer's indebtedness by another. IV. A barter transaction where only goods and services are exchanged. a. Only statement I is correct. b. Only statement II is correct. c. Only statements I and IV are correct. d. Only statements I, II, and IV are correct. e. Statements I, II, III, and IV are all correct.
e. Statements I, II, III, and IV are all correct.
Phyllis is an electrician employed by Bogie Company. Phil is a self-employed electrician. During the current year, Phyllis's salary is $75,000 and Phil's net self-employment income is $75,000. Which of the following statements about Social Security and self-employment taxes paid is/are correct? I. Phil's self-employment tax is greater than the Social Security tax paid on Phyllis's income. II. Phil pays more self-employment tax than Phyllis pays in Social Security tax. III. Phil and Phyllis pay the same amount of tax. IV. Phil's self-employment tax is equal to the Social Security tax paid on Phyllis's income. a. Only I is correct b. Only II is correct c. Only IV is correct d. I and III are correct e. II and IV are correct
c. Only IV is correct
Adjusted gross income (AGI) I. is used to provide limitations on certain deductions from AGI. II. is unique to the individual income tax formula. III. is the result before subtracting certain allowable personal expenditures from gross income. a. Only statement I is correct. b. Only statement II is correct. c. Only statement III is correct. d. Statements I and II are correct. e. Statements I, II, and III are correct.
c. Only statement III is correct.
Sylvia is a United States citizen who has established legal residency in Japan. She has been teaching school there for several years. Her annual salary is $60,000. Anne's tax situation is a. She is not subject to U.S. tax law. b. She can elect to exclude her foreign income from U.S. taxation and take a tax credit for foreign taxes paid. c. She can elect to exclude her foreign income from U.S. taxation, or take a tax credit for foreign taxes paid. d. She is not eligible to take a tax credit for foreign taxes paid or exclude her foreign income from her U.S. gross income. e. Only one jurisdiction, either the U.S. or Japan, not both, can tax Sylvia on her income while in Japan.
c. She can elect to exclude her foreign income from U.S. taxation, or take a tax credit for foreign taxes paid.
. Ordinary income is I. the common type of income that individuals and businesses earn. II. receives no special treatment under tax laws. III. the character of the gain from the sales of shares of stock held more than one year a. Only statement I is correct. b. Only statement II is correct. c. Statements I and II are correct. d. Statements I and III are correct. e. Statements I, II, and III are correct.
c. Statements I and II are correct.
Melissa owns 40,000 shares of Wilkerson Corporation common stock that cost $99,000 four years ago. During the current year, Wilkerson distributes a 10% stock dividend to shareholders. Melissa receives 4,000 new shares when the market value of the stock is $9 per share. Later in the year, the corporation distributes a cash dividend of $0.50 per share. What are the tax effects of these distributions to Melissa? I.The $22,000 cash dividend is included in gross income. II. The $36,000 stock dividend is included in gross income. III. Only $20,000 of the cash dividend is included in gross income. IV. At the end of the year, the per share basis in the stock is $2.25. a. Statements I and II are correct. b. Statements III and IV are correct. c. Statements I and IV are correct. d. Only statement IV is correct. e. Only statement I is correct.
c. Statements I and IV are correct.
Gary receives $40,000 worth of Quantro, Inc., common stock from the estate of his late grandmother. He receives a $100 cash dividend six months later. Before the end of the year, Gary sells the stock for $42,000. Due to these events, how much must Gary include in his gross income for the year? a. $-0- b. $100 c. $2,000 d. $2,100 e. $42,100
d. $2,100
During 2013, Pamela worked two "jobs." She performed financial consulting activities for 1,000 hours and real estate development and rental activities for 1,200 hours. Her real estate development and rental activities produced a loss of $35,000. Her financial consulting generated a net business income of $40,000. How much of the loss can Pamela deduct against her financial consulting income? a. $ - 0 - b. $17,500 c. $25,000 d. $35,000 e. $40,000
d. $35,000 ($1,200 hours estate/rental hours/2,200 total hours = 55% --> Pamela is deemed a real estate professional and therefore can deduct ful $35,000)
Which of the following is a taxable entity? a. Sole Proprietorship. b. Partnership. c. S Corporation. d. C Corporation.
d. C Corporation.
. Carter sold 100 shares of Mitsui, Inc. for $8,000 but he only recognized $2,000 as income because the original purchase price was $6,000. This is due to the a. Ability to Pay Concept. b. Administrative Convenience Concept. c. Arm's-Length Transaction Concept. d. Capital Recovery Concept. e. Business Purpose Concept.
d. Capital Recovery Concept.
No income is taxed until the taxpayer is allowed the return of the original investment due to the a. Ability to Pay Concept. b. Administrative Convenience Concept. c. Arm's-Length Transaction Concept. d. Capital Recovery Concept. e. Business Purpose concept
d. Capital Recovery Concept.
If a taxpayer has a choice of receiving income in the current year versus the following year, which of the following tax rates is important in determining the year in which he should include the income? a. Average b. Effective c. Composite d. Marginal
d. Marginal
Three requirements must be met in order to deduct a trade or business expense. Also, deductible trade or business expenses may not be which of the following: I. A Captial Expenditure II. Reasonable in Amount III. A payment that Frustrates Public Policy IV. An Expense Related to Tax-Exempt Income a. Only statement I is correct. b. Only statement II is correct. c. Statements III and IV are all correct. d. Statements I, II, and III are all correct. e. Statements I, III, and IV are all correct.
e. Statements I, III, and IV are all correct.
Items that are excluded from gross income include all of the following with the exception of: a. gifts. b. inheritances. c. life insurance proceeds. d. municipal bond interest. e. U.S. Treasury Bills interest.
e. U.S. Treasury Bills interest.
Lidia, age 62, retires this year from her job as executive vice-president of Western Inc. She will receive a pension of $3,000 per month from Rollerderby's qualified pension plan. Lidia contributed $100,000 to the plan. Her contributions were never subject to tax. In addition, she will receive $1,600 per month from an annuity she purchased many years ago at a cost of $96,000. The pension and the annuity will be paid until she dies. At the date of her retirement, her life expectancy is 30 years. Which of the following statements regarding the taxability of the payments is/are correct? I. Under the capital recovery concept, Lidia will not have to recognize any income from the annuity payment until she has recovered her $96,000 investment. II. Lidia will not have to recognize as income the portion of each pension plan payment that is considered a return of her $100,000 contribution to the plan. III. Lidia will not have to recognize as income the portion of each annuity payment that is a return of her $96,000 investment. IV. Because none of the contributions were taxed, Lidia will be taxed on the entire $3,000 from the pension plan. a. Only statement I is correct. b. Only statements II and III are correct. c. Only statement III is correct. d. Only statements III and IV are correct. e. Only statement IV is correct.
d. Only statements III and IV are correct.
*****Michelle is a bank president and a weekend artist. She regularly sells her paintings at flea markets and spends an average of 9 hours a week painting or selling. Although she made about $6,000 last year from sales of artwork, she tells her friends she would do it for free. For the current tax year, she incurs expenses of $800 primarily for admission fees to flee markets and art fairs. The $800 is: I. deductible for AGI purposes as a business expense. II. a miscellaneous itemized deduction. III. is deductible only because she has revenue from the activity. a. Only statement III is correct. b. Only statement I is correct. c. Statements I and II are correct. d. Statements II and III are correct. e. Statements I, II, and III are correct.
d. Statements II and III are correct. ***(Hobby losses - expenses in excess of income - can not be deducted; $800 expenses is < $6000 income)
In planning situations, tax research is undertaken: I. To always attempt to minimize taxes II. Considering the client's nontax objectives III. To find the best way to accomplish a desired result IV. Considering the client's tax objectives a. Only statement I is correct. b. Only statement IV is correct. c. Statements II and III are correct. d. Statements II, III, and IV are all correct. e. Statements I, II, III, and IV are all correct.
d. Statements II, III, and IV are all correct.
Which of the following statements pertaining to tax law is true? I. A tax textbook is considered a primary source II. Secondary sources help located and interpret primary sources III. Primary sources emanate from the three branches of the federal government IV. An article in a law journal written by a former commissioner of the IRS is considered a secondary source of tax law a. Only statement I is correct. b. Statements I and II are correct. c. Statements I, II, and III are all correct. d. Statements II, III, and IV are all correct. e. Statements I, II, III, and IV are all correct.
d. Statements II, III, and IV are all correct.
During the year, Daniel sells both of his personal vehicles. On January 10, he realizes a $9,000 loss on the sale of the first car. On April 5, he realizes a $1,000 gain on the sale of the second car. Assume Daniel's salary for the year is $50,000, and he has no other income. What is Daniel's Adjusted Gross Income? a. $40,000 b. $41,000 c. $42,000 d. $50,000 e. $51,000
e. $51,000 (Car is a personal use; Losses on sale of personal use assets are generally not deductible)
******Mercedes is an employee of MWH company and drives her car 12,000 miles a year for business and 3,000 miles a year for commuting and personal use. She is not reimbursed by her employer. She wants to claim the largest tax deduction possible for business use of her car, before any limitations on itemized deductions. Her total auto expenses for 2015 are as follows: Gas, oil, and maintenance $4,600 Insurance 720 Interest on car loan 500 Depreciation 2,960 License 80 Parking fees and tolls (100% business) 130 Mercedes's total 2015 deduction for automobile use is: a. $6,420 b. $6,818 c. $6,790 d. $7,030 e. $7,250
e. $7,250 (Use Actual Cost Method --> 12,000 business miles/15,000 total miles = 80%; 4,600 + 720 + 500 + 2,960 + 80 = 8,860; 8,860 x .80 = 7088 + 130 = 7218)
Which of the following information is not required for substantiation of business entertainment expenditures? a. Time and place of event. b. Specific business purpose of the event. c. Receipt to provide evidence of amount of expenditure. d. Identity of, and business relationship to, those persons attending the event. e. All of the above information is required to substantiate business entertainment.
e. All of the above information is required to substantiate business entertainment.
Which of the following expenses is not deductible for AGI? a. Alimony paid. b. Contributions to an IRA. c. Moving expenses. d. Interest on qualified student loans. e. Interest expense related to an investment.
e. Interest expense related to an investment.
Thomas had $8,500 withheld from his paycheck, but since he has a large amount of interest and dividends, he is required to make quarterly estimated tax payments due to the a. Ability to Pay Concept. b. Administrative Convenience Concept. c. Arm's-Length Transaction Concept. d. Capital Recovery Concept. e. Pay-as-You-Go Concept
e. Pay-as-You-Go Concept
Withholding of taxes from the taxpayers wages and quarterly estimated tax payments are a result of the a. Ability to Pay Concept. b. Administrative Convenience Concept. c. Arm's-Length Transaction Concept. d. Capital Recovery Concept. e. Pay-as-You-Go Concept.
e. Pay-as-You-Go Concept.
The intent of the alimony recapture rules is to a. Prevent the payee from having a large tax liability when there is not an adequate wherewithal to pay. b. Prevent former spouses from skipping out of their obligations to pay the other spouse. c. Reclassify property settlements as capital gains, rather than ordinary income. d. Prevent child support from being disguised as alimony. e. Prevent tax deductions for property settlements.
e. Prevent tax deductions for property settlements.