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equipment had been subject to depreciation from 1979 until
November 17, 1989, and their bases had been appropriately reduced
on Woodbine's books. Grave plots were held as inventory on
Woodbine's books and were expensed as they were sold. We
conclude that Howard Berger's original $100,000 cost had been
reduced, as a result of depreciation, and increased--to reflect
the unrecovered costs of unsold mausoleum crypts and cremation
niches--to $75,945, the amount on Woodbine's books on November
17, 1989, the date of Alice Berger's sale to the Kunkowskis.
We next consider whether Howard Berger's accrual of deposit
income on his transfer of March 14, 1989, to Alice changes the
basis of the Woodbine property and business in her hands.
Section 1041(b) provides that after a transfer incident to
divorce the basis of the transferee in the property shall be the
adjusted basis of the transferor. Sec. 1.1041-1T(d), A-11,
Temporary Income Tax Regs., 49 Fed. Reg. 34453 (Aug. 31, 1984),
describes the treatment of the transferee of property under
section 1041 as follows:
The transferee of property under section 1041
recognizes no gain or loss upon receipt of the
transferred property. In all cases, the basis of the
transferred property in the hands of the transferee is
the adjusted basis of such property in the hands of the
transferor immediately before the transfer. Even if
the transfer is a bona fide sale, the transferee does
not acquire a basis in the transferred property equal
to the transferee's cost (the fair market value). This
carryover basis rule applies whether the adjusted basis
of the transferred property is less than, equal to, or
greater than its fair market value at the time of
transfer (or the value of any consideration provided by
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