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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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Last modified: May 25, 2011