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settlement did not result in the spouse becoming the beneficial
owner of 75 percent of the house. The Court in Urbauer v.
Commissioner, supra, noted there was no impediment to a division
by the divorce court of the ownership of the house, but the
divorce court chose not to effect a change in ownership. Like
Urbauer, in this case there was no restriction on the transfer of
the Note from the Corporation to petitioner, but no such transfer
was made. The Note specifically provided for subsequent payees.
Although the Note provided that the Corporation was the original
payee, the term also included “any party who may subsequently
hold an interest in this Note.” There actually was no change in
the Corporation’s ownership of the Note. We hold that there was
no beneficial ownership by petitioner in the Note executed
between the Corporation and Dr. Bowman. Since there was no
transfer of the Note or of a beneficial interest in the Note,
section 453B(g) is not applicable in this case.
Petitioner’s receipt of $1,750 each month from Dr. Capps
falls under section 1041. As discussed above, under section
1041(a), no gain or loss is recognized on the transfer of
property from an individual to a spouse, or to a former spouse if
the transfer is incident to divorce. Balding v. Commissioner, 98
T.C. 368 (1992). But there is another factor to consider. In
Gibbs v. Commissioner, T.C. Memo. 1997-196, this Court held that
the nonrecognition provided in section 1041 does not apply to
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Last modified: May 25, 2011