Friday, July 26, 2019
Tax Planning Problem Assignment Example | Topics and Well Written Essays - 250 words
Tax Planning Problem - Assignment Example This is because in case of alimony, tax is charged to the party who receives the benefits of income and thus is nondeductible to the party earning that income (Cussen, Investopedia.com). In this regard, NellÃ¢â¬â¢s gross income and thus her taxable income would be increased by that amount as Nell is receiving the benefits of KirbyÃ¢â¬â¢s income. 3) Out of $900, only the amount of $600 is considered as alimony. This is because this amount canÃ¢â¬â¢t be declared as child support since continuation of this amount is not pertinent to any contingency related to child in terms of his death or attaining the age of maturity (Cussen, Investopedia.com). As a result, being alimony, this will reduce KirbyÃ¢â¬â¢s taxable income and increase NellÃ¢â¬â¢s taxable income, each by $600. On the other hand, the remaining $300, to be ceased after any contingency to the child, can be declared as child support and thus, not being alimony, wouldnÃ¢â¬â¢t account for any tax-related consequence to any of the party; neither of the party would recognize this amount in his / her taxable income. Works Cited Cussen MP. Ã¢â¬Å"The Fundamentals of Spousal Support Taxation.Ã¢â¬ Investopedia.com. Investopedia, n.d. Web. 3 Feb. 2011.