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with the assertions of Howard and respondent that she had or
acquired any ownership interest in the Woodbine property and
business, she concurs with respondent's general position on the
application of Jud Plumbing and Standard Paving, and argues,
under the assignment of income principle, that the deposits would
be income to Howard Berger as of the date of transfer. Howard
Berger now repudiates his 1989 return position and asserts that
the transfer of his remaining one-half interest in the Woodbine
property and business was a nontaxable transfer of property under
section 1041, not an assignment of income, and that Jud Plumbing
does not apply.
We hold that section 1041 does not trump clear reflection of
income in the peculiar factual circumstances of this case. As a
result, Howard Berger will be required to accrue a share of
income from Phase II mausoleum crypt sales for 1989, even though
he transferred his one-half interest in Woodbine in March 1989, 2
months prior to the completion of the Phase II mausoleum.
However, by reason of section 1041, he recognized no gain on that
transfer or on Alice Berger's subsequent sale of Woodbine to the
Kunkowskis.
Section 1041 was enacted by section 421 of the Deficit
Reduction Act of 1984 (DEFRA), Pub. L. 98-369, 98 Stat. 793-795.
It provides as a general rule that
No gain or loss shall be recognized on a transfer of
property from an individual to * * *
(1) a spouse, or
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