Jerry and Sally were divorced under an agreement executed July 1, 2014. The terms of the agreement provide that Jerry will transfer to Sally his interest in a rental house worth $250,000 with a tax basis to Jerry of $80,000. What is the amount of the gain that must be recognized by Jerry on the transfer of the property and what is Sally's tax basis in the property after the transfer, respectively?

Question

Quizplus · Accepted Answer

Under the tax code, transfers of property between spouses or incident to divorce are generally not taxable events. Therefore, Jerry recognizes no gain on the transfer, and Sally's tax basis in the property is the same as Jerry's original basis, which is $80,000.

Jerry and Sally Were Divorced Under an Agreement Executed July