Under the terms of a divorce agreement entered into in 2017, Lanny was to pay his wife Joyce $2,000 per month in alimony and $500 per month in child support. For a 12-month period, Lanny can deduct from gross income (and Joyce must include in gross income):

a. $0

b. $30,000

c. $6,000

d. $24,000

e. None of these

B. $ 30,000

Explanation:

Given:

Monthly payments deducted

Child support = $ 500

Alimony = $ 2000

1 year = 12 months

Total amount payable in 1 year = child support in 2017 + alimony in 2017

= ($500 * 12) + ($2000 * 12)

= $6000 + $ 24000

= $30000

d. $24,000

Explanation:

A divorce agreement is a contract that is formed between a husband and wife that states conditions under which they are dissolving their marriage. It includes the terms that they will both agree to fulfil on marriage dissolution.

Once the contract is signed by both parties it becomes binding on them.

Under the alimony terms the amount that will be included as gross income deduction is the amount that is going to the recipient.

In this case the $2,000 for 12 months. The $500 will be paid as child support and not included in the gross income deduction.

Child support payments are not included in alimony.

Gross income deduction = 2,000 * 12 = $24,000