Greg transfers property on August 8 of the current year with an adjusted basis of $40,000 and an FMV of $90,000 to his ex-wife as a property settlement that is part of their divorce agreement. The property settlement agreement and the divorce were both finalized on June 3 of the current year. Greg has made a gift of
A)$0.
B)$40,000.
C)$80,000.
D)$90,000.

Question

Quizplus · Accepted Answer

Transfers of property between spouses or incident to divorce are generally not considered gifts for federal tax purposes. Instead, the recipient assumes the donor's basis in the property. Since Greg's transfer of property to his ex-wife is part of a divorce settlement, it is not treated as a gift.

Greg Transfers Property on August 8 of the Current Year