- 55 -
distribution laws. Id.
Congress was dissatisfied with the resulting patchwork and
desired to make the Federal tax law less intrusive into marital
property relationships. Id. at 1492. Section 1041 was the
result. The Ways and Means Committee explained
that the transfer of property to a spouse incident to a
divorce will be treated, for income tax purposes, in
the same manner as a gift. Gain (including recapture
income) or loss will not be recognized to the
transferor, and the transferee will receive the
property at the transferor's basis (whether the
property has appreciated or depreciated in value).
* * * This nonrecognition rule applies whether the
transfer is for the relinquishment of marital rights,
for cash or other property, for the assumption of
liabilities in excess of basis, or for other
consideration and is intended to apply to any
indebtedness which is discharged. Thus, uniform
Federal income tax consequences will apply to these
transfers notwithstanding that the property may be
subject to differing state property laws. [Id.; fn.
ref. omitted.]
An assignment of income is generally disregarded unless the
underlying income-producing property is also transferred. See
generally, 3 Bittker & Lokken, Federal Taxation of Income,
Estates and Gifts, ch. 75 (2d ed. 1991 & Supp. 1995). Usually
there is no property underlying personal service income so that
assignment of personal service income is disregarded, and the
taxpayer who earned the income is taxed on it under Lucas v.
Earl, 281 U.S. 111 (1930). In this case, property (a one-half
interest in Woodbine) was transferred, subject to contracts for
sale of mausoleum crypts and related receivables and deposit
liabilities. Cf. Kochansky v. Commissioner, T.C. Memo. 1994-160
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