Deductions Homework Problems & Solutions
Prob 1: Alimony & Child Payments
Pursuant to Mary and John’s divorce agreement, in 2014: Mary paid her ex-husband, Bob, $10,000 in cash each month; Mary paid
$20,000 in cash to support their children, who live full-time with Bob; and Mary transferred a cottage she inherited from her
parents (fair market value (FMV of $100,000) to Bob, as a property settlement. Which of the above items can Mary deduct as
alimony on her 2014 individual federal income tax return? Why or why not?
Answer Prob 1: Alimony & Child Payments
• MARY CAN DEDUCT the $10,000 cash she paid her ex-husband, Bob, $10,000 in cash each month because is the payment is
cash, Mary and Bob do not file a joint return, live together and meet the other requirements. • MARY CANNOT DEDUCT the
$20,000 cash because it is a child support payment, not an alimony payment. • MARY CANNOT DEDUCT the $10,000 FMV of the
cottage she transferred to Bob because it is a property settlement, which is not considered an alimony payment.
Prob 2: Moving Expenses
• US Army Colonel Chris Cook incurred $1,000 in moving expenses that were not paid by the Army when she moved to her new
home on an army base that was 30 miles from her prior home on army base. • Can Colonel Cook deduct the $1,000 as a moving
expense on her tax return? • Why or why not?
Answer Prob 2: Moving Expenses
• Even though Colonel Cook did not meet the requirement for the moving expense deduction to move 50 or more miles from her
old home on an army base to her new home on another army base, she can deduct the $1,000 moving expense because the Army
did not reimburse her for the moving expense and members of the armed forces, like Colonel Cook, who move because of a
military order and a permanent change of station, do not have meet the distance and time tests to deduct their moving expenses
Prob 3: Moving Expenses
• After Mark was honorably discharged from the US Navy, he incurred $1,000 to move from...