Section 1041

AAA

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.

INVESTOPEDIA EXPLAINS '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. Gift Tax

    A federal tax applied to an individual giving anything of value ...
  2. Deduction

    Any item or expenditure subtracted from gross income to reduce ...
  3. Marital Deduction

    A tax deduction that allows an individual to transfer some assets ...
  4. Transfer

    A change in ownership of an asset, or a movement of funds and/or ...
  5. Transfer Tax

    Any kind of tax that is levied on the transfer of official documents ...
  6. Forbearance

    A temporary postponement of mortgage payments.
Related Articles
  1. Holding Titles On Real Property
    Retirement

    Holding Titles On Real Property

  2. Tips For The Prospective Landlord
    Home & Auto

    Tips For The Prospective Landlord

  3. The Tax Benefits Of Having A Spouse
    Taxes

    The Tax Benefits Of Having A Spouse

  4. Getting Started On Your Estate Plan
    Options & Futures

    Getting Started On Your Estate Plan

comments powered by Disqus
Hot Definitions
  1. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  2. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  6. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer ...
Trading Center