Mr. and Mrs. Melrose recently divorced. Under the terms of the divorce decree, Mr. Melrose transferred to Mrs. Melrose his one-half interest in their former personal residence. The home was valued at $350,000 and had a tax basis of $275,000. He is also required to pay $1,500 per month to his ex-wife, of which $1,000 represents child support for their 7-year old son and $500 is alimony.

He transferred the residence in August of the current year and made each of the required monthly payments for August through December. How much of a tax deduction is Mr. Melrose permitted for these transfers this year?

		$2,500
		$5,000
		$7,500
		$9,000