Which Internal Revenue Code section allows spouses to transfer property tax free?

The correct choice is indeed IRC 1041. This section of the Internal Revenue Code allows spouses to transfer property between them during a divorce without incurring any immediate tax liability. This means that property transfers as part of a final divorce decree or separation agreement can occur without triggering capital gains taxes, which would typically apply if one spouse sold the property to the other.

IRC 1041 is a valuable provision for those going through a divorce, as it facilitates the division of assets in a tax-efficient manner, ensuring that neither party faces a tax burden merely because of the transfer of ownership that occurs during the divorce process. This provision greatly simplifies the financial aspect of divorce settlements by allowing couples to focus on asset division without the added stress of tax implications, which can often complicate and prolong negotiations.

Other sections presented do not pertain to tax-free transfers of property in the context of divorce. For instance, IRC 401(k) primarily deals with retirement plans and their tax treatment, while IRC 5001 addresses penalties related to certain taxes, and IRC 7201 deals with tax evasion, all of which are not relevant to the property transfer aspects during a divorce. Understanding IRC 1041 is crucial for a Certified Divorce Financial Analyst, as it impacts