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(2) a former spouse, but only if the transfer is
incident to the divorce.
Section 1041 is effective generally for transfers after July 18,
1984, in taxable years ending after such date; see DEFRA sec.
421(d), 98 Stat. 795.
Prior to the enactment of section 1041, the resolution of
property rights incident to a divorce gave rise to differing tax
results, depending on how each spouse's rights and obligations
were viewed for State law purposes. The Supreme Court had ruled
that a transfer of separately owned appreciated property to a
spouse (or former spouse) in exchange for the release of marital
claims resulted in the recognition of gain to the transferor.
United States v. Davis, 370 U.S. 65 (1962). However, upon an
approximately equal division of community property on divorce, no
gain was recognized on the theory that there was only a
nontaxable partition, not a sale or exchange. Carrieres v.
Commissioner, 64 T.C. 959, 964 (1975), affd. per curiam 552 F.2d
1350 (9th Cir. 1977); see also Siewert v. Commissioner, 72 T.C.
326, 332-333 (1979). The Commissioner applied a like result to
the partition of jointly held property. See Rev. Rul. 74-347,
1974-2 C.B. 26. The tax treatment of divisions of property
between spouses involving other various types of ownership under
the different State laws was often unclear and resulted in much
litigation. See H. Rept. 98-432 (Part 2), at 1491 (1984).
Several common law States had tried to avoid the result in the
Davis case by amending and bending their property and equitable
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