Under the terms of their divorce agreement, Humphrey transferred Corporation H stock to his former wife, Greta, as a property settlement. At the time of the transfer, the stock had a basis to Humphrey of $40,000 and a fair market value of $55,000. What is the tax consequence of this transaction to Humphrey, and what is Greta's basis in the Corporation H stock?

Question

Quizplus · Accepted Answer

Under IRS rules, transfers of property between spouses or incident to divorce are generally not taxable events. Therefore, Humphrey has no gain or loss. Greta's basis in the stock is the same as Humphrey's adjusted basis, which is $40,000.

Under the Terms of Their Divorce Agreement, Humphrey Transferred Corporation