Evelynn S. Stilz - Page 4




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               There are two components to petitioner's basis in the house.           
          First, as a coowner she had her share of the purchase price and             
          cost of improvements.  See sec. 1012.2  Second, when she acquired           
          her husband's interest in the house incident to the divorce, she            
          took his adjusted basis in the property pursuant to section                 
          1041(b)(2).3  The total purchase price paid by petitioner and her           


               2SEC. 1012.  BASIS OF PROPERTY--COST.                                  
                    The basis of property shall be the cost of such                   
               property, except as otherwise provided in this                         
               subchapter and subchapters C (relating to corporate                    
               distributions and adjustments), K (relating to partners                
               and partnerships), and P (relating to capital gains and                
               losses). The cost of real property shall not include                   
               any amount in respect of real property taxes which are                 
               treated under section 164(d) as imposed on the                         
               taxpayer.                                                              
               3SEC. 1041.  TRANSFERS OF PROPERTY BETWEEN SPOUSES OR                  
                         INCIDENT TO DIVORCE.                                         
                    (a) General Rule.--No gain or loss shall be recognized            
               on a transfer of property from an individual to (or in trust           
               for the benefit of)--                                                  
                         (1) a spouse, or                                             
                         (2) a former spouse, but only if the transfer is             
                    incident to the divorce.                                          
                    (b) Transfer Treated as Gift; Transferee Has                      
               Transferor’s Basis.--In the case of any transfer of property           
               described in subsection (a)--                                          
                         (1) for purposes of this subtitle, the property              
                    shall be treated as acquired by the transferee by gift,           
                    and                                                               
                         (2) the basis of the transferee in the property              
                                                             (continued...)           




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