Property transfers between spouses (or ex-spouses within 1 yr / incident to divorce within 6 yrs) are tax-free.
IRC §1041 treats spouse-to-spouse (or spouse-to-ex-spouse incident to divorce) transfers as gifts — no gain/loss recognized. Recipient takes carryover basis. Critical for divorce planning: transferring a low-basis asset triggers ZERO tax at transfer but bakes in future gain for the receiving spouse. Model AFTER-TAX values, not gross values, when negotiating property settlements — a $1M brokerage with $200K basis is worth far less than $1M cash.
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A Qualified Domestic Relations Order splits qualified plans between spouses with no 10% penalty and no tax.
Three flavors of §6015 relief remove joint liability for a spouse's understated tax, deficiency, or unpaid balance.
Grantor trust for the benefit of an ex-spouse shifts income taxation to the lower-bracket recipient post-TCJA.
A properly-drafted marital agreement locks down separate ownership of pre-marital and gift/inherited assets.
In the year of separation, MFS can beat MFJ when incomes are lopsided, deductions are personal, or spouse is untrustworthy.
§408(d)(6) IRA transfers and §223(f)(7) HSA transfers pursuant to divorce decree are tax-free — no rollover rules apply.
Divorced spouses can still both claim §121 use/ownership tests via §121(d)(3) tacking — up to $500K exclusion preserved.
With alimony non-deductible post-2018, restructure as property transfers, HSA/IRA splits, and unallocated support.