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shall be recognized by Ms. Read as a result of that transfer.”
Majority op. p. 39. The majority fails to discuss persuasively the
fact that not only did Ms. Read transfer her stock to MMP, but that
MMP paid her for that stock as well, nor does the majority explain
persuasively why the capital gain that Ms. Read realized on the sale
of her stock to a third party (MMP) is excluded from her gross income
by virtue of either: (1) A statutory provision (section 1041) that
applies only to transfers between spouses or (2) a regulatory provi-
sion (Q&A-9) that extends section 1041's reach to certain transfers
to third parties on behalf of a spouse.
Congress enacted section 1041 in 1984. Before that time, an
interspousal transfer of property for adequate consideration was a
taxable transaction for Federal income tax purposes; a transferring
spouse was taxed on a transfer of appreciated property to his or her
spouse, and the recipient spouse received a basis in the transferred
property equal to its fair market value on the date of transfer. See
United States v. Davis, 370 U.S. 65 (1962). Congress enacted section
1041 to change that result. See H. Rept. 98-432 (Part 2), at
1491-1492 (1984). As enacted, section 1041 applies to defer the
recognition of gain or loss on an interspousal transfer of property
until the time that the recipient spouse transfers the property
outside of the marital economic unit consisting of both spouses
together. See Blatt v. Commissioner, 102 T.C. 77, 79-80 (1994).
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