Property Transfers & Distribution of Assets and Liabilities

• Author: Brian C. Vertz and Mitchell E. Benson
• Pages: 39-86

PROPERTY TRANSFERS &

DISTRIBUTION OF

ASSETS & LIABILITIES

2-1

CHAPTER 2

PROPERTY TRANSFERS & DISTRIBUTION

OF ASSETS AND LIABILITIES

§2.1 PROPERTY TRANSFERS

§2.1.1 Internal Revenue Code Section 1041

§2.1.1.1 Non-Recognition of Tax for Property Transfers Between Spouses

§2.1.1.1.1 Transfer Incident to Divorce; Presumption

§2.1.1.1.2 Non-Applicability of I.R.C. §1041

§2.1.1.1.3 Tax Basis of Property Transferred by a Spouse or Former Spouse

§2.1.1.2 Tax on Sale to Non-Spouse: Capital Gain Rates

§2.1.1.3 Transfers to Third Parties on Behalf of a Spouse or Former Spouse

§2.1.1.4 Disposition of Closely Held Corporate Stock by Stock Redemption

§2.1.2 United States Savings Bonds; Accrued Interest Taxable to Transferor

§2.1.3 Stock Options and Restricted Stock, Transfer in Divorce

§2.1.4 Record Requirements

§2.1.5 Accounts Receivable; Value Reduced by Income Taxes

§2.1.6 Contingent Tax Liabilities; Effect on Valuation of Distributable Assets

§2.1.6.1 Effect on Distribution of Assets

§2.1.6.2 Some Possible Solutions to Consideration of Contingent Tax Liabilities

§2.1.6.3 Variations on Majority Rule

§2.1.6.3.1 Retirement Funds as Variation on Majority Rule

§2.1.6.3.2 Tax and Federal Court’s Position

§2.1.6.4 Valuation of Marital Estate; Reduction in Value for Potential Tax

§2.1.6.5 Depreciated Property

§2.1.6.6 Qualif‌ied Opportunit y Zones

§2.1.7 Virtual Currency

§2.1.7.1 What Is Virtual Currency?

§2.1.7.2 How Does The IRS Treat Virtual Currency?

§2.1.8 Section 83—Property Transfers in Connection with Services

§2.1.9 Carried Interest—Section 1061 of the Internal Revenue Code

§2.1.10 Transfer Issues Associated with Public Company Stock

§2.1.11 Section 1202 Qualif‌ied Small Business Stock

§2.2 [RESERVED]

§2.3 SALE OF PRINCIPAL RESIDENCEPOSTAUGUST 5, 1997 (CURRENT RULE)

§2.3.1 Excerpts of I.R.C. §121

§2.3.2 Exclusion of $250,000 of Gain

§2.3.3 Ownership and Use Test

PROPERTY TRANSFERS &

DISTRIBUTION OF

ASSETS & LIABILITIES

Divorce Taxation 2-2

§2.3.3.1 Imputed Ownership—Tacking on Ownership of Spouse or Former Spouse

§2.3.3.2 Imputed Use —Tacking on Use by Spouse or Former Spouse

§2.3.3.3 Limitation on Exclusion of Gain From Sale or Exchange of Principal Residence—

Vacation or Second Home

§2.3.3.4 Reduced Maximum Exclusion

§2.3.3.5 Title Controls Liability for Tax

§2.3.3.6 Single Owner Entities

§2.3.3.7 Trusts

§2.3.4 Principal Residence

§2.3.4.1 Multiple Residences

§2.3.4.2 Vacant Land

§2.3.5 Joint Filers, Exclusion up to $500,000

§2.3.6 Exclusion Every Two Years

§2.3.7 Exercise of $125,000 Exclusion Under Previous Act

§2.4 INTEREST ON EQUITABLE DISTRIBUTION INSTALLMENT PAYMENTS

§2.4.1 Amount of Interest

§2.4.2 Tax Consequences of Interest Payments

§2.4.2.1 Interest Taxable to Payee

§2.4.2.1.1 Inf‌lation Adjustment Considered as Interest

§2.4.2.1.2 Interest on Child Support in Arrears

§2.4.2.2 Interest Deductible to Payor

§2.4.3 Solutions to Tax Treatment of Interest

§2.4.3.1 Treat as Alimony

§2.4.3.2 Gross Up Deferred Payments

§2.5 MORTGAGE INTEREST ON QUALIFIED RESIDENCE

§2.5.1 Excerpts from I.R.C. §163(h) and I.R.C. §280A(d)(1)

§2.5.2 Deductibility of Qualif‌ied Residence Interest

§2.5.2.1 Eligibility During Separation

§2.5.2.2 Ref‌inancing Acquisition Indebtedness af ter Divorce

§2.5.2.3 Phase Out of Mortgage Interest Deduction

§2.5.3 Interest Is Deductible Only if Paid by Taxpayer

§2.6 CARRY FORWARDS AS MARITAL ASSETS

§2.7 EQUITABLE DISTRIBUTION OF TAX LIABILITIES

§2.7.1 Jointly Liable

§2.7.2 Solely Liable

§2.7.3 Separate Returns

§2.8 CONSIDERATION OF TAX SHELTERS

§2.9 TAX REFUNDS AS MARITAL ASSETS

§2.10 DISABILITY INCOME

PROPERTY TRANSFERS &

DISTRIBUTION OF

ASSETS & LIABILITIES

2-3 Property Transfers & Distribution of Assets and Liabilities §2 .1.1

§2. PROPERTY TRANSFERS & DISTRIBUTION OF ASSETS AND LIABILITIES

§2.1 PROPERTY TRANSFERS

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

 

   





 

  

Σεε

§2.1.1 Internal Revenue Code Section 1041

Σεχ. 1041. Τρανσφερσ οφ προπερτψ βετωεεν σπουσεσ ορ ινχιδεντ το διϖορχε.

(α) Γενεραλ ρυλε.

    



(1) 

(2) 

(β) Τρανσφερ τρεατεδ ασ γιφτ; τρανσφερεε ηασ τρανσφερορσ βασισ.



(1) 

(2) 

(χ) Ινχιδεντ το διϖορχε.



(1) 

(2) 

 Υ.Σ. ϖ. ∆αϖισ





