Explain the importance of the distinction between alimony and a property settlem

Question

Explain the importance of the distinction between alimony and a property settlement.

A. Alimony is considered to be taxable income to the recipient and a deductible expense for the payor. A property settlement is neither taxable income nor a deductible expense.

B. Alimony is considered to be taxable income to the recipient but not a deductible expense for the payor. A property settlement is considered to be nontaxable income to the recipient and a deductible expense for the payor.

C.Alimony is considered to be nontaxable income to the recipient but a deductible expense for the payor. A property settlement is considered to be taxable income to the recipient but not a deductible expense for the payor.

D.Alimony is neither taxable income nor a deductible expense. A property settlement is considered to be taxable income to the recipient and a deductible expense for the payor.

Explanation / Answer

A. Alimony is considered to be taxable income to the recipient and a deductible expense for the payor. A property settlement is neither taxable income nor a deductible expense.

Alimony are generally deductible by the spouse making the payments and are included in the income of the spouse receiving the payments.
Property settlement incident to divorce are not taxable income to the recipient and, therefore, are not tax deductible to the payor.

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