After 5 Years of Marriage, Dave and Janet Decided to Get

question 65

Essay

After 5 years of marriage, Dave and Janet decided to get a divorce.As part of the divorce settlement, Janet transfers to Dave the house she purchased prior to their marriage.Janet's adjusted basis for the house is $125,000 and the fair market value is $200,000 on the date of the transfer.What are the tax consequences to Janet and to Dave as a result of the transfer?

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Definitions:

Deferred Call Provision

A clause in a bond contract that protects the bond issuer from calling (repurchasing) the bond for a specified period, providing stability to the bondholder.

Make-Whole

A provision that compensates bondholders for the loss of anticipated interest, typically in the event of an early redemption.

Floating-Rate Bonds

Bonds with variable interest rates that adjust periodically according to a standard market rate.

Market Rate

refers to the usual rate charged or paid for a good or service in a particular market, or the rate of interest available in the marketplace for investment funds.