Separation agreement and divorce decree

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Reference no: EM134021111

Question

Under a 2019 separation agreement and divorce decree, Helen transfers a building (which is her separate property) to her ex-husband, Ken, in exchange for his release of any rights he has in other property that Helen acquired during the marriage. The transfer is made on the day of the divorce. Helen bought the building in 1996 for $1 million. Over the years, she made $200,000 worth of capital improvements in the building (using her separate funds). Its fair market value on the date she transfers it to Ken is $1.5 million. A week later, however, the market crashes, and Ken is forced to sell the building for $800,000.

1. What was the basis of the building when Helen bought it?

2. What was the adjusted basis when she transferred it to Ken?

3. Was the transfer to Ken incident to a divorce?

4. Did Helen realize a gain when she transferred the building to Ken, which at that time had a fair market value of $1.5 million?

5. When Ken received the building from Helen, what was his basis in the building?

6. When Ken sold the building, what gain or loss did he realize?

Reference no: EM134021111

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