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“incident to divorce”, it must: (1) Occur within 1 year after the
date on which the marriage ceases, or (2) is related to the
cessation of marriage. Sec. 1041(c)(1) and (2). If the transfer
of the Tryon Road property had been directly between petitioner
and Ms. Olsen, section 1041(a)(2) and (c)(1) would be satisfied
because the transfer occurred within 4 months of the agreement.
See Godlewski v. Commissioner, 90 T.C. 200, 204 n.7 (1988).
However, because the transfer did not occur directly between
petitioner and Ms. Olsen, but rather between petitioner and North
Fork Timber Company, a third party, the transfer must be “on
behalf of” the former spouse within the meaning of section
1.1041-1T(c), Q&A-9, Temporary Income Tax Regs., 49 Fed. Reg.
34452 (Aug. 31, 1984) (Q&A-9), in order to qualify for
nonrecognition treatment. A transfer of property to a third
party “on behalf of” a former spouse will qualify under section
1041 in three situations: (1) Where the transfer to the third
party is required by a divorce or separation instrument; (2)
where the transfer to the third party is pursuant to the written
request of the former spouse; or (3) where the transferor
2(...continued)
* * * * * * *
(c) Incident to Divorce.--For purposes of
subsection (a)(2), a transfer of property is incident
to the divorce if such transfer--
(1) occurs within 1 year after the date on
which the marriages ceases, or
(2) is related to the cessation of the
marriage.
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