USA Adding to the basis of a residence

[HJS]

If part of a divorce settlement one spouse pays the other spouse in order to buy their share of the house they jointly owned can the spouse who paid these funds to the other spouse add those funds to the basis of the house when selling the residence.

 

[DrStrangeLove]

If I remember correctly, a property transfer as part of a divorce is a nontaxable gift from one (soon to be ex-) spouse to the other according to Sec. 1041(b), and you take the carryover basis. So I don't think you can step up the basis of the house. You won't have capital gains on the buyout, if that's what you're worried about.

 

[HJS]

Thank you. When I read the reg that you cited I thought the same however I was not sure.