Taxable divisions of community property take one of two forms. As already noted, section can apply to certain pre-enactment transfers, but only where both spouses or former spouses explicitly so elect. Petitioner's return did not include in gross income any portion of the gain realized on the transfer of her percent community interests in the 11 partnerships to Mr. Under the exceptions provided in DEFRA section d 2 and d 3 , section does apply to certain pre-enactment transfers if both spouses or former spouses explicitly so elect. But it is a far different thing to suggest, as petitioner does, that the recipient's economic position is not altered by the receipt of cash instead of an equivalent amount of community property.
Moreover, petitioner's argument fails even on its own terms. As already noted, section can apply to certain pre-enactment transfers, but only where both spouses or former spouses explicitly so elect. Petitioner suggests that section applies to the transfer at issue, because the property settlement agreement was part of an interim decree of divorce, which under California law did not become final until December 24, , i. On November 17, , she filed for divorce against her husband, Walter J. One day prior thereto, on June 11, , petitioner and her husband, Mr. Whether the Transfer Was a Nontaxable Division of Property or a Taxable Sale Under Section Petitioner contends that even if the transfer of her percent community interests does not qualify for nonrecognition pursuant to section , she nonetheless is not required to recognize gain on the transfer, because it amounted to a nontaxable division of community assets rather than a taxable property sale under section Harrington, in accordance with the property settlement agreement. A property settlement agreement was incorporated in the interlocutory judgment and became part of the judgment. Commissioner, supra at The issue was framed in terms of whether the division represents a nontaxable partition or a taxable sale of the community property. Taxable divisions of community property take one of two forms. Pursuant to the terms of the settlement agreement, Mr. Section a provides for nonrecognition of gain or loss on transfers of property between spouses or between former spouses "incident to the divorce", and, pursuant to section b , the transferred property is required to be treated by the transferee as acquired by gift. We consider each of these arguments in turn. John Gigounas, 50 California St. In petitioner's case, however, nothing in the record suggests that any such election was made. Under the exceptions provided in DEFRA section d 2 and d 3 , section does apply to certain pre-enactment transfers if both spouses or former spouses explicitly so elect. In addition, they also stipulated that the community property was distributed in accord with the terms of the interlocutory decree and property settlement agreement that was filed the following day, June 12, Preliminarily, we note that when one speaks of a "transfer" of property, it is commonly understood as referring to a transaction by which such property changes hands or title. An unequal division, where one spouse receives property having an aggregate value equal to more than half the value of the entire community property, causes recognition of gain, if any, to the spouse transferring the larger portion. Indeed, the receipt of cash or other outside property derived from the husband's separate property is from petitioner's standpoint no different from a taxable sale to a stranger. We think that the term should be similarly interpreted for purposes of section d of DEFRA absent a sufficient reason to the contrary. In determining the applicability of section , by reason of the effective date provisions, the critical fact is neither the date of the final divorce decree nor the date of the interim decree, but rather the date on which the properties were transferred, namely, June 11, In order to reflect concessions of the parties, Decision will be entered under Rule By receiving cash, petitioner terminated her economic stake in any future increase or decrease in value of the community property transferred. Commissioner, supra, which reflects the case law in effect prior to the enactment of section
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