Section 1041


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.

  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. Encumbrance

    A claim against a property by a party that is not the owner. ...
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