Glenn and Vera divorce during 2019. Per their 2019 divorce agreement, Glenn receives their former personal residence valued at $180,000 with a basis of $100,000. Also, Glenn will pay Vera $5,000 annually for 8 years. If Vera dies before the end of the 8 years, the balance of the payments is to be paid to Vera's estate in a lump sum. The couple has not lived together for the past 2 years.
A. Glenn can deduct $5,000 annually for alimony paid to Vera.
B. Vera can deduct $40,000 (1/2 of the unrealized gain on the house).
C. Vera does not recognize any income from the property and/or cash transactions.
D. Vera must recognize $40,000 as a gain on the disposition of her interest in the house.
E. Vera must recognize all the cash received as alimony income.
Answer: C
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