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situations in which a spouse transfers property to a third party in
satisfaction of an obligation that is owed (or a gift that is made)
by the nontransferring spouse to the third party. In the latter
cases, Q&A-9 operates to tax the nontransferring spouse on the
transfer to the third party, if and to the extent that the transfer
is taxable, as if the nontransferring spouse had first received a
gift of the property from the transferring spouse. Q&A-9 says
nothing about affording similar treatment to any proceeds which are
received by a transferring spouse from a third party pursuant to the
property transfer.
While it is true that Q&A-9 recognizes that some transfers of
property by a spouse to a third party may qualify for nonrecognition
treatment under section 1041, Q&A-9 requires that the transfers must
be “on behalf of” the transferor’s spouse. The majority essentially
takes the position that Ms. Read’s transfer of stock to MMP was on
Mr. Read’s behalf because, the majority concludes, the redemption
benefited him. We disagree. In this case, Ms. Read’s transfer of
stock to MMP was on her own behalf since it allowed her to cash out
her interest in MMP at its appreciated value (and it allowed her to
do so, under the majority’s view, without any tax implications to
her).
The critical fact is that Mr. Read had no obligation to MMP that
was satisfied by Ms. Read’s transfer of her stock to MMP. Thus,
although Ms. Read may have transferred her stock to MMP at the
direction of Mr. Read, we do not believe that she did so “on behalf
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