Facts
Pursuant to a separation agreement, the taxpayer's (ex-)wife agreed to relinquish any potential claims or marital rights, in exchange for which he transferred to her 1,000 shares of stock in DuPont. These shares had cost him $74,775.37, and had appreciated to $82,250 at the time of the transfer.
The government argued that the appreciation should be included in the taxpayer's gross income, viewing the transfer of property as an exchange for the release of an independent legal obligation. The taxpayer argued that the appreciation should not count as gross income, since the transfer was more like a division of property between co-owners than a sale that resulted in gain.
Read more about this topic: United States V. Davis
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