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was "incident to" the divorce decree, and, as a result, the
transfer of the Land was, pursuant to the regulations, "related
to the cessation of the marriage". See sec. 1.1041-1T(b), Q&A-7,
Temporary Income Tax Regs., supra. Even if the regulations were
not applicable, the transfer satisfied the statutory requirement
that the transfer be "related to the cessation of the marriage".
See sec. 1041(c). Accordingly, section 1041 is applicable.
II. Value of Property Transferred Includable in Gross Income
Respondent determined that John's transfer of the Land
discharged a $308,906 debt to Louise for legal and collection
expenses (i.e., $300,606 legal plus $8,300 collection), and, as a
result, such amount is includable in Louise's 1992 gross income.
Louise failed to present any evidence relating to the collection
expenses, and, therefore, the $8,300 is includable in her gross
income. Louise contends, however, that John was obligated to pay
the legal expenses; she was merely a conduit for the payment of
the fees to her attorneys; and the value of property transferred
to discharge this debt is not includable in her gross income. We
reject her contentions.
Generally, taxpayers are treated as realizing taxable income
when their expenses are paid by another. See Commissioner v.
Glenshaw Glass Co., 348 U.S. 426 (1955); O'Malley v.
Commissioner, 91 T.C. 352, 358 (1988). Louise was obligated to
pay the legal expenses. The fact that her attorneys were paid
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