LIEB BLOG

How current events impact business & real estate

Thursday, August 11, 2011

Divorcing couples not subject to capital gains tax on their real estate

In contrast to the rule on transfer tax, just discussed, Federal Law provides that such a transfer of property incident to divorce does not work a gain or loss concerning capital gains tax; hence no stepped-up in basis results.

§ 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.

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