Reference no: EM131739757

1. Dave and Sue's divorce became final on January 2 of the current year. Dave is an executive for a Fortune 500 company and Sue is starting her own business this year. In the current year (year 1 of the divorce agreement), Dave expects his marginal income tax rate to be 35% and Sue's marginal income tax rate will be 25% because of some start-up expenses of her business. Two years from now (year 3 of the divorce agreement), Dave will retire and will be in the 15% tax bracket, and Sue's business, a sole proprietorship, will cause her to be in the 35% tax bracket. Dave intentionally front-loaded his alimony payments to Sue ($60,000 in year 1, $40,000 in year 2, and $20,000 in year 3). What is Dave's alimony recapture in year 3? Formula: R₃ = P₁ + P₂ -2P₃ - $37,500