Ed and Ann Ross were divorced in January 2012. In accordance
with the divorce decree, Ed transferred the title in their
home to Ann in 2012. The home, which had a fair market value
of $150,000, was subject to a $50,000 mortgage that had twenty
more years to run. Monthly mortgage payments amount to
$1,000. Under the terms of settlement, Ed is obligated to make
the mortgage payments on the home for the full remaining
twenty-year term of the indebtedness, regardless of how long
Ann lives. Ed made twelve mortgage payments in 2012. What
amount is taxable as alimony in Ann’s 2012 return?

(a) The requirement is to determine the amount that is
taxable as alimony in Ann’s return. In order to be treated as alimony,
a payment must be made in cash and be received by or on
behalf of the payee spouse. Furthermore, cash payments must be
required to terminate upon the death of the payee spouse to be
treated as alimony. In this case, the transfer of title in the home
to Ann is not a cash payment and cannot be treated as alimony.
Although the mortgage payments are cash payments made on
behalf of Ann, the payments are not treated as alimony because
they will be made throughout the full twenty-year mortgage period
and will not terminate in the event of Ann’s death.