Section 15.34 Taxation of Property Transfers Between Spouses

• Library: Family Law Deskbook and 2014 Supp

A. (§15.34) Taxation of Property Transfers Between Spouses

The taxability of property transfers and divisions between spouses incident to a divorce proceeding is governed by I.R.C. § 1041. No gain or loss is recognized on a transfer of property from a spouse to a spouse, or a former spouse, but only if the transfer is incident to a divorce. I.R.C. § 1041(a). Section 1041 applies to all transfers between spouses, and a divorce does not need to be contemplated between the spouses at the time of the transfer for it to apply. 26 C.F.R. § 1.1041-1T(a). Additionally, annulments and other determinations that the marriage is void ab initio still constitute divorces for purposes of I.R.C. § 1041 treatment. 26 C.F.R. § 1.1041-1T(b). A transfer is presumed to be “incident to the divorce” if the...