Help with tax research project. The project should includeFacts,Issue and Conclusion 1,Analysis 1,Cite Tax Authority,Apply Tax Law to Facts,Tax Law and Analysis,Conclusion

Tax Research Problems Divorce. J and M are obtaining a divorce after ten years of marriage. They have two children. A draft of the divorce agreement and property settlement between them states that they will have join custody of the children. They plan to live in the same general area and each child will live half of each year with each parent. Since J's AGI is $40,000 and M's is $15,000, he will pay her $100 per month for each child ($2,400 per year) and $500 per month for her support. The $500 ceases on his or her death, her remarriage, or when her AGI equals his. In addition, J agrees to continue to pay premiums of $50 per month on his life insurance policy payable to her. All jointly owned property will be distributed as follows: Home ................................ Furnishings ......................... Investments ........................ Basis $50,000 20,000 10,000 Market Value $80,000 15,000 30,000 Transfer to M M J Each will keep his or her individually owned personal items and an automobile. This is an amicable divorce and they both request your advice. Their objective is to maximize total tax benefits without making too many changes to the agreement. Use tax-planning techniques when possible in responding to the following questions. a. Who will be able to claim the children as dependents? b. What is each one's filing status for the current year if neither one remarries? c. Does the $500 per month qualify as alimony? Does the $50 per month qualify as alimony? d. J expects to make the $500 and $50 payments for three months while legally separated before the divorce. What are the tax effects during this period? e. What is the tax effect of the distribution of jointly owned property to J and to M? f. What tax planning advice could you give to J and M that would decrease their combined tax liability? Facts Issue and Conclusion 1 Analysis 1 Cite Tax Authority Apply Tax Law to Facts Tax Law and Analysis Conclusion a. J will be in a position to claim the children as dependents as he is responsible for their upkeep as well as the M upkeep. This is according to the tax law the person responsible for the upkeep and financing the children is regarded as the children dependents. Also his financial position compared to that of M qualifies him for that position. b. The filling status of M will be $116,000 while for J is 61,600 c. Yes the $500 per month qualifies as alimony since it will be for the maintenance and upkeep of the wife. The $50 does not qualify as it is not from a court order but from the free consent of the husband. This is because alimony is a husband's or wives courtordered provision for a spouse after separation or divorce. Voluntary payments made outside a divorce or separation decree are not deductible (Cain, 2008). d. Under these three months before divorce there will be no tax effects on both parties. During the period between a couple separating and finally getting divorced assets can be transferred from one spouse to the other at base cost. Afterwards, the exemption will no longer apply although spouses may still be treated as \"connected persons\" for CGT purposes. This means any asset transfer will be treated as having taken place at market value by HMRC (Oldham, 2016). e. Under distribution of the jointly owned property, because the two parties are not aliens, the transfer will be none-taxable. However, upon distribution each party will be taxed individual unlike in the past where they were taxed as a couple f. Before an agreement separating out your assets has been reached, it is sensible to bear in mind what tax charges will arise due to living apart and prior to divorce. The CGT exemption for married couples will only apply during the tax year in which spouses separate rather than continuing until they are actually divorced (Oldham, 2016). To benefit from relief from CGT on transfers of property between spouses, the court order or agreement that the property should be transferred from one spouse to the other must be made before the end of the tax year of separation. It is also not enough for there to simply be an agreement that a property is to be transferred from one spouse to the other; the transfer will need to be completed within the same tax-year period in order to avoid potential adverse tax implications (Herbst, (2011). References Cain, P. A. (2008). Taxing Families Fairly. Santa Clara L. Rev., 48, 805. Herbst, C. M. (2011). The impact of the Earned Income Tax Credit on marriage and divorce: Evidence from flow data. Population research and Policy review, 30(1), 101-128. Oldham, J. T. (2016). Divorce, Separation and the Distribution of Property. Law Journal Press