Arnold and Barbara Cane were divorced in June 2018. Pursuant to the divorce decree, Arnold is obliged to perform as follows. How does the following transaction in the divorce agreement affect Arnolds and Barbaras taxable income?

Arnold transfers the title of their personal home to Barbara. Arnold is to continue making payments on the house until it is fully paid off. In 2021, Arnold made payments totaling $18,000.

Select one:

a.

Barbara has taxable income of $18,000

b.

Neither Arnold or Barbara has taxable income

c.

Both Arnold and Barbara has taxable income of $18,000

d.

Arnold and Barbara each has taxable income of $9,000