As part of the divorce agreement, Tyler transfers his ownership interest in their personal residence to Lupe. The house had been jointly owned by Tyler and Lupe and the adjusted basis is $520,000. At the time of the transfer to Lupe, the fair market value is $800,000. What is the recognized gain to Tyler, and what is Lupe's basis for the house?
A)$0 and $520,000.
B)$0 and $800,000.
C)$140,000 and $520,000.
D)$280,000 and $800,000.
E)None of the above.

Question

Quizplus · Accepted Answer

Since the transfer of the residence is part of the divorce agreement, it qualifies for a tax-free transfer under IRC section 1041. Therefore, there is no recognized gain or loss to Tyler upon transferring the house to Lupe. Lupe's basis for the house will be the same as Tyler's adjusted basis of $520,000.

As Part of the Divorce Agreement, Tyler Transfers His Ownership