- 48 -
Judge Ruwe points out that, in the instant case and prior cases,
“the Commissioner has consistently treated Q&A-9 as applying to
divorce-related corporate redemptions, and this position has been
adopted by the U.S. Court of Appeals for the Ninth Circuit in
Arnes v. United States, 981 F.2d 456 (9th Cir. 1992).”
IV. Section 1041(b) and Q&A-9 Provide for Avoidance of Whipsaw
Section 1041(b)5 is intended to ensure that the Government
is not whipsawed as a result of inconsistent positions taken by
former spouses. Section 1041(b) provides that, in the case of
any transfer of property to which section 1041 applies, (1) the
transferee is treated as if he or she acquired the property by
gift and (2) the transferee takes the basis of the transferor.
The Ways and Means Committee report accompanying enactment of
section 1041 clearly stated the importance of avoiding whipsaw in
cases where section 1041(a) applies. That committee report
5 Sec. 1041(b) provides:
SEC. 1041(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 shall be the adjusted basis of the
transferor.
Page: Previous 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 NextLast modified: May 25, 2011