Divorce rental buyout isn’t a taxable sale — EA exam

Divorce property transfers under IRC §1041 are nonrecognition: no gain/loss to the recipient and no deduction to the payor; it’s a property settlement. This question traps you into treating the buyout like a taxable sale or confusing it with child support. Remember the carryover basis rule for incident-to-divorce transfers.

EA Exam practice question — Part 1: Individuals.

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