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Section 1041 provides in pertinent part as follows:
SEC. 1041. TRANSFERS OF PROPERTY BETWEEN SPOUSES
OR INCIDENT TO DIVORCE.
(a) General Rule.–-No gain or loss shall be
recognized on a transfer of property from an individual
to (or in trust for the benefit of)--
(1) a spouse, or
(2) a former spouse, but only if the transfer
is incident to the divorce.
(b) Transfer Treated as Gift; Transferee Has
Transferor’s Basis.–-In the case of any transfer of
property described in subsection (a)--
(1) for purposes of this subtitle, the
property shall be treated as acquired by the
transferee by gift, and
(2) the basis of the transferee in the
property shall be the adjusted basis of the
transferor.
(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 marriage ceases, or
(2) is related to the cessation of the
marriage.
Mr. Walker’s transfer of his 25-percent interest in the
Happy Valley property to petitioner on September 26, 1997, took
place incident to their divorce because it occurred within 1 year
after the date on which their marriage ceased, December 20, 1996.
Sec. 1041(c)(1). Consequently, Mr. Walker’s transfer of his
interest in the Happy Valley property to petitioner qualified for
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