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for a credit against the $500,000 equalizing money judgment. In
accordance with the Settlement Agreement, Mr. Walker transferred
his 25-percent interest in the Happy Valley property to
petitioner on September 26, 1997, pursuant to a quitclaim deed.
The quitclaim deed was recorded on October 2, 1997. Thus,
Mr. Walker no longer had any rights in the Happy Valley property
as of the date petitioner signed the bargain and sale deed that
conveyed an undivided 50-percent interest in the Happy Valley
property to Parker Development, October 10, 1997.
Petitioner entered into the foregoing transactions after
having been advised of the tax consequences of the form of those
transactions. There is no reason here to disregard that form.
B. Application of Section 1041 to the Transactions
Involving the Happy Valley Property
Because petitioner cannot invoke the doctrine of substance
over form, we must consider whether two separate transactions
qualify for nonrecognition-of-gain treatment under section
1041(a). The first transaction involves Mr. Walker’s transfer of
his 25-percent interest in the Happy Valley property to
petitioner in consideration for a Settlement Agreement that
provided to Mr. Walker a credit against the $500,000 equalizing
money judgment that he owed to petitioner. The second
transaction involves petitioner’s sale of her undivided
50-percent interest in the Happy Valley property to an unrelated
third party, Parker Development.
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