DEFINITION of 'Section 1041'

A section of the Internal Revenue Code that mandates that any transfer of property from one spouse to another is income tax-free. No deductible loss or taxable gain can be declared. This section applies to transfers during marriage as well as in the divorce process. Section 1041 was enacted in order to simplify the consolidation of marital assets.

BREAKING DOWN 'Section 1041'

Section 1041 does not apply to transfers to nonresident-alien spouses, certain transfers of mortgaged property between trusts or transfers of U.S. savings bonds. This section also places the tax burden on the recipient of any transfer of marital property incident to a divorce (the property is treated as a gift); therefore, it can be in the interest of a divorcing spouse to negotiate for assets that have minimal taxable appreciation.

RELATED TERMS
  1. Section 1231 Property

    A tax term relating to depreciable business property that has ...
  2. IRS Publication 504

    A document published by the Internal Revenue Service that provides ...
  3. Transfer Tax

    Any kind of tax that is levied on the transfer of official documents ...
  4. Direct Transfer

    A transfer of assets from one type of tax-deferred retirement ...
  5. Marital Property

    A U.S. state-level legal distinction of a married individual's ...
  6. Marital Deduction

    A tax deduction that allows an individual to transfer some assets ...
Related Articles
  1. Taxes

    What Is Section 1231 Property?

    Section 1231 property is depreciable business property that’s held for a year or longer.
  2. Personal Finance

    How To Manage Your Finances Through A Divorce

    Dividing assets and liabilities in a divorce can be a sad, complicated task. But with some planning, patience and the help of a financial adviser, splitting couples can avoid some obvious and ...
  3. Retirement

    Divorcing? The Right Way to Split Retirement Plans

    Mishandling how you define and allocate retirement-plan assets in a divorce can cost you plenty in taxes and aggravation. Here's how to do it right.
  4. Personal Finance

    Transferring Credit Card Balances To A New Card

    Before you take advantage of that new credit card's 0% interest balance transfer offer, read our step-by-step guide.
  5. Financial Advisor

    Top Tips for Helping Clients Through a Divorce

    It may take a delicate touch to properly assist clients who are going through a divorce. Here are some tips.
  6. Managing Wealth

    Divorce Funding: A New Investment Opportunity?

    Learn how companies are making millions investing in the broken marriages of others. Discover how one person's divorce can be another's investment opportunity.
  7. Taxes

    The Fundamentals Of Spousal Support Taxation

    The spousal support that is paid out after a divorce can have varying tax implications. We'll look at what you need to know to settle on the best tax solution.
  8. Taxes

    Avoid Capital Gains Tax On Your Home Sale

    If you have property to sell and want to avoid capital gains tax, a Section 1031 exchange may be the answer.
  9. Retirement

    How to Protect Your Retirement After a Divorce

    Divorce is never fun, but knowing the rules and anticipating the impact of retirement plan division and pension payouts can make things easier.
  10. Financial Advisor

    Top Tips for Keeping Clients’ Divorces Private

    For the wealthy, divorce can mean negative public fallout if certain details of their private lives come out. Here's how to keep those details private.
RELATED FAQS
  1. Are there any regulations on transfer pricing?

    Learn about transfer pricing, its role in intra-business calculations, and how the U.S. government regulates transfer pricing ... Read Answer >>
  2. How can I protect my business from my spouse during a high net worth divorce?

    Understand what constitutes a high-net-worth divorce, and learn how business owners can protect their companies when going ... Read Answer >>
  3. If an individual still has his or her former spouse as the beneficiary of an IRA, ...

    It depends. Generally, divorce does not effectively change a beneficiary designation unless the divorce decree makes a stipulation ... Read Answer >>
  4. How are Social Security benefits calculated for divorced spouse?

    Find out how the Social Security retirement benefit for divorced spouses is calculated, including the impact of age and outside ... Read Answer >>
Hot Definitions
  1. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center