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. Transfer Tax

    Any kind of tax that is levied on the transfer of official documents ...
  3. IRS Publication 504

    A document published by the Internal Revenue Service that provides ...
  4. Marital Property

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

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

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

    What It Costs To Get Divorced

    Here's a breakdown of how much it will cost to get divorced in the U.S. today.
  5. Personal Finance

    The Best And Worst Times (Financially) To Get Divorced

    Divorce is rarely financially advantageous to either party. There are times, however, when it can have an even deeper impact on your personal economic situation.
  6. Insights

    How Divorce Can Adversely Affect The Economy

    Divorce not only affects the people involved, it also affects the nation's economy.
  7. Personal Finance

    5 Financial Steps You Need to Take Before Divorce

    These are five financial steps that need to be taken before a divorce.
  8. Personal Finance

    3 Steps to Divide Your 401(k) During Divorce

    When splitting assets in a divorce, 401(k) plans are included and need to be divided properly.
  9. Personal Finance

    Where Will You Live After a Grey Divorce?

    Couples who divorce later in life can use a home equity conversion mortgage to cover housing costs.
  10. Personal Finance

    Getting Divorced: Mistakes Men Make, Mistakes Women Make

    When they get divorced, men and women make different types of mistakes. A strategic primer.
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 >>
Hot Definitions
  1. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
  2. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly AIMR) that measures the competence and integrity of financial ...
  3. Initial Coin Offering (ICO)

    An Initial Coin Offering (ICO) is an unregulated means by which funds are raised for a new cryptocurrency venture.
  4. The Bernie Madoff Story

    Bernie Madoff ran a multibillion-dollar Ponzi scheme that is considered the largest financial fraud of all time.
  5. Pyramid Scheme

    An illegal investment scam based on a hierarchical setup. New recruits make up the base of the pyramid and provide the funding, ...
  6. Ponzi Scheme

    A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns ...
Trading Center