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1041(b)(2) provides that the nontransferring spouse’s basis in
the property is the same as the transferring spouse’s basis. The
nontransferring spouse is then treated as having transferred the
property to the third party. Thus if Q&A-9 applies to this case,
Ms. Read will be treated as having transferred her stock to Mr.
Read, and Mr. Read’s basis in the transferred stock will be the
same as Ms. Read’s--zero. Mr. Read will then be treated as
having transferred the stock to MMP. It follows that the redemp-
tion proceeds should be treated as having been received by Mr.
Read who in turn is treated as having paid Ms. Read.
Pursuant to Q&A-9, a transfer of property to a third party
required by a divorce or separation instrument will be treated as
qualified under section 1041 only if it is made “on behalf of”
the nontransferring spouse. In order to accomplish this regula-
tory scheme and the statutory goal of eliminating whipsaws, the
phrase “on behalf of” must have the same meaning when applied to
each of the divorcing spouses.
There is nothing in Q&A-9 to indicate that the Commissioner
was attempting to, or could, change the existing standards for
determining whether a corporate redemption of one shareholder’s
stock could be treated as a distribution to the remaining share-
holder. Indeed, Q&A-9 is a temporary regulation intended only to
effect the legislative objective of section 1041. Nothing in
section 1041, or its legislative history, suggests that it was
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