Alicia and Rafel are in the process of negotiating a divorce agreement to be finalized in 2022. They both worked during the marriage and contributed an equal amount to the marital assets. They own a home with a fair market value of $400,000 (cost of $300,000) that is subject to a mortgage of $250,000. They have lived in the home for 12 years. They also have investment assets, all held more than one year, with a cost of $160,000 and a fair market value of $410,000. As a result, the net worth of the couple is $560,000 ($400,000 $250,000 + $410,000).

Alicia would like to continue to live in the house. Therefore, she has proposed that she receive the residence subject to the mortgage, a net value of $150,000. In addition, she would receive $17,600 each year for the next 10 years, which has a present value (at 6% interest) of $130,000. Rafel would receive the investment assets. If Rafel accepts this plan, he must sell one-half of the investments so that he can purchase a home. Assume that you are counseling Alicia.

Answer the following to explain whether the proposed agreement would be "fair" on an after-tax basis.

a. Alicia would receive a before-tax amount equal to $fill in the blank 1.

b. Rafel would receive a before-tax amount equal to $fill in the blank 2. The $17,600 Rafel pays Alicia is

deductiblenot deductiblenot deductible

by Rafel and the interest on the obligation

will be deductiblewill not be deductiblewill not be deductible

.

c. Rafel's basis in the investment assets he receives will be $fill in the blank 5. Therefore, if the investments were sold for their current value, Rafel would have a $fill in the blank 6

taxable gainnontaxable gaindeductible losstaxable gain

.