Tax-Free Transfers Between Spouses or Incident to Divorce

§ 1041. Transfers of property between spouses or incident to divorce(a) General ruleNo gain or loss shall be recognized on a transfer of property from an individual to (or in trust for the benefit of)—(1) a spouse, or (2) a former spouse, but only if the transfer is incident to the divorce. (b) Transfer treated as gift; transferee has transferor’s basisIn the case of any transfer of property described in subsection (a)—(1) for purposes of this subtitle, the property shall be treated as acquired by the transferee by gift, and (2) the basis of the transferee in the property shall be the adjusted basis of the transferor. (c) Incident to divorceFor purposes of subsection (a)(2), a transfer of property is incident to the divorce if such transfer—(1) occurs within 1 year after the date on which the marriage ceases, or (2) is related to the cessation of the marriage. (d) Special rule where spouse is nonresident alienSubsection (a) shall not apply if the spouse (or former spouse) of the individual making the transfer is a nonresident alien. (e) Transfers in trust where liability exceeds basisSubsection (a) shall not apply to the transfer of property in trust to the extent that—(1) the sum of the amount of the liabilities assumed, plus the amount of the liabilities to which the property is subject, exceeds (2) the total of the adjusted basis of the property transferred. Proper adjustment shall be made under subsection (b) in the basis of the transferee in such property to take into account gain recognized by reason of the preceding sentence. (Added Pub. L. 98–369, div. A, title IV, § 421(a), July 18, 1984, 98 Stat. 793; amended Pub. L. 99–514, title XVIII, § 1842(b), Oct. 22, 1986, 100 Stat. 2853; Pub. L. 100–647, title I, § 1018(l)(3), Nov. 10, 1988, 102 Stat. 3584.) Editorial Notes Amendments1988—Subsec. (d). Pub. L. 100–647 substituted “Subsection (a)” for “Paragraph (1) of subsection (a)” and “the spouse (or former spouse)” for “the spouse”. 1986—Subsec. (e). Pub. L. 99–514 added subsec. (e). Statutory Notes and Related Subsidiaries Effective Date of 1988 AmendmentPub. L. 100–647, title I, § 1018(l)(3), Nov. 10, 1988, 102 Stat. 3584, provided that the amendment made by that section is effective with respect to transfers after June 21, 1988. Effective Date of 1986 AmendmentAmendment by Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.