Income - Gross Income - Other Inclusions

Question 1

What is the tax treatment of alimony?

Answer 1

1. Taxed to the recipient;

2. Allowed as a “for AGI” deduction to payor.

Question 2

Describe the personal injury exclusion rule.

Answer 2

Compensatory damages for physical injuries or sickness only are excluded from income.

Question 3

What are the requirements that must be met for a payment to qualify as alimony?

Answer 3

1. Payment must be in cash or via expense payment;
2. Must be contingent on recipient still being alive;
3. Required by a written agreement or decree;
4. Not identified as “non-alimony.”

Question 4

What is the tax treatment of child support?

Answer 4

Never taxable to the recipient, no deduction for payor.