697 / What is the tax basis of property acquired from a spouse or incident to a divorce?

Where property is transferred between spouses, or former spouses incident to a divorce, after July 18, 1984 pursuant to an instrument in effect after that date, the transferee’s basis in the property is generally the adjusted basis of the property in the hands of the transferor immediately before the transfer and no gain or loss is recognized at the time of transfer (unless, under certain circumstances, the property is transferred in trust).¹ These rules may apply to transfers made after 1983 if both parties elect.² See Q 789 regarding transfers incident to divorce.

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1. IRC §§ 453B(g), 1041; Temp. Treas. Reg. § 1.1041-1T, A-1.

2. Temp. Treas. Reg. § 1.1041-1T, A-16.

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