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A transfer of property is "incident to the divorce" if it
either occurs within 1 year of the divorce or is "related to the
cessation of the marriage". Sec. 1041(c). The statute does not
define the phrase "related to the cessation of the marriage", but
temporary regulations provide a safe harbor for certain
transactions occurring within 6 years of the divorce. The
regulations provide that such transfers are related to the
cessation of the marriage if the transfer is "pursuant to a
divorce or separation instrument, as defined in section
71(b)(2)". Sec. 1.1041-1T(b), Q&A-7, Temporary Income Tax Regs.,
49 Fed. Reg. 34453 (Aug. 31, 1984). A section 71(b)(2) divorce
or separation instrument includes a "written instrument incident
to * * * a [divorce] decree". Sec. 71(b)(2).
The parties agree that the 1989 Property Settlement was,
pursuant to section 71(b)(2), "incident to" the divorce decree
because its purpose was to divide the marital property. The 1992
Agreement resolved a dispute arising under the 1989 Property
Settlement and completed the division of marital property. See,
e.g., Stevens v. Commissioner, 439 F.2d 69, 70 n.4 (2d Cir. 1971)
(paraphrasing "incident to" as "[implementing] the terms of the
decree"); Barnum v. Commissioner, 19 T.C. 401, 407 (1952)
(paraphrasing "incident to" as "related to"); Hesse v.
Commissioner, 7 T.C. 700, 704 (1946) (paraphrasing "incident to"
as "in connection with"). We conclude that the 1992 Agreement
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