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

question 35

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 $230,000 and the fair market value is $410,000 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:

Liability

A legal responsibility or obligation, often involving the requirement to compensate for loss or damage.

Withdrawal

Withdrawal involves the act of removing oneself or ceasing to participate in an activity, agreement, or other commitments.

Partnership

A sanctioned form of business where partners collectively manage the enterprise and split the financial gains.

Contracts

Contracts that engage two or more persons in binding commitments recognized and updatable through legal proceedings.