§1041 Transfers of property between spouses or incident to divorce

Summary

You do not have to report a taxable gain or loss when you transfer property to your spouse or to a former spouse if the transfer is part of the divorce. For tax purposes the recipient is treated like they received a gift, and the recipient’s tax basis in the property is the same as the giver’s adjusted basis. A transfer is "incident to the divorce" if it happens within 1 year after the marriage ends or if it is related to ending the marriage. The rule does not apply if the spouse or former spouse is a nonresident alien. It also does not apply to any part of a trust transfer when the debts taken on plus debts tied to the property are more than the property’s adjusted basis.