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$344,938 of accrued interest; (3) $300,606 of legal expenses; and
(4) $8,300 of collection expenses. At the time of the transfer,
John's basis in the Land was $130,794.
The 1992 Agreement also provided that Louise grant John an
option to repurchase the Land for $2,265,000. John assigned the
option to Investment Partners of Charlotte, Ltd., which exercised
the option on December 31, 1992, and consummated the purchase of
the Land from Louise on January 11, 1993. On that latter date,
Louise's attorneys received $300,000 of the sales proceeds (i.e.,
which discharged Louise's obligation to pay for their legal
services), Louise received the remainder of the proceeds, and she
marked John's promissory note "Paid and Satisfied".
OPINION
I. Transfer of Property Incident to Divorce
Respondent contends that section 1041 applies to John's
transfer of the Land to Louise. John agrees with respondent's
contention, while Louise contends that section 1041 does not
apply.
Section 1041(a) provides that "No gain or loss shall be
recognized on a transfer of property from an individual to * * *
a former spouse, but only if the transfer is incident to the
divorce." If section 1041 applies, the transferee's basis in the
property is the transferor's adjusted basis. See sec.
1041(b)(2).
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Last modified: May 25, 2011