Problem

TAX ACCOUNTING QUESTION

Alan and Courtney's divorce became effective January 1 of the current year. Under the terms of the divorce, Courtney received custody of their 9 year-old son, Victor. Courtney received certain stocks that Alan had purchased before their marriage. His cost of the stock was $15,000 and the fair market value on the date Courtney received the stock was $28,000. Courtney also received $3,000 each month starting in January current year. The payments consisted of $2,000 for child support and $1,000 as alimony. Courtney sold the stock for $32,000 on July 1 of the current. Alan's accountant stated that the monies paid to Courtney were more than half of Victor's support.

Discuss the impact of the settlement on Alan and Courtney. Be specific regarding alimony, child support, property settlement, filing status, dependency exemption and gain or losses. Explain fully.