Thank you for visiting Fred and Wilma divorced during the current tax year As part of the divorce agreement Fred is required to transfer to Wilma ownership of stock. This page is designed to guide you through key points and clear explanations related to the topic at hand. We aim to make your learning experience smooth, insightful, and informative. Dive in and discover the answers you're looking for!
Answer :
Wilma recognizes $125,000 as income for the transfer and her basis in the stock is $80,000.
Wilma would recognize income for the transfer of the stock. The amount of income she recognizes is equal to the fair market value of the stock at the date of transfer, which is $125,000.
Her basis in the stock would be the same as Fred's basis before the transfer, which is $80,000.
- Wilma recognizes $125,000 as income for the transfer.
- Her basis in the stock is $80,000.
1. In a divorce agreement, if one party transfers ownership of an asset to the other party, it is treated as a taxable event.
2. The amount of income recognized by the receiving party is equal to the fair market value of the asset at the date of transfer.
3. In this case, the fair market value of the stock in ACE Corporation at the date of transfer is $125,000.
4. Therefore, Wilma would recognize $125,000 as income for the transfer.
5. Her basis in the stock is the same as Fred's basis before the transfer, which is $80,000.
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