26 U.S.C. § 1041: Transfers of property between spouses or incident to divorce

a spouse, or a former spouse, but only if the transfer is incident to the divorce. for purposes of this subtitle, the property shall be treated as acquired by the transferee by gift, and the basis of the transferee in the property shall be the adjusted basis of the transferor. occurs within 1 year after the date on which the marriage ceases, or is related to the cessation of the marriage. Subsection (a) shall not apply if the spouse (or former spouse) of the individual making the transfer is a nonresident alien. the sum of the amount of the liabilities assumed, plus the amount of the liabilities to which the property is subject, exceeds the total of the adjusted basis of the property transferred. Except as otherwise provided in this subsection, the amendments made by this section [enacting this section and amending sections 47, 72, 101, 453, 453B, 1001, 1015, and 1239 of this title] shall apply to transfers after the date of the enactment of this Act [ July 18, 1984 ] in taxable years ending after such date. If both spouses or former spouses make an election under this paragraph, the amendments made by this section shall apply to all transfers made by such spouses (or former spouses) after December 31, 1983 . Except in the case of an election under paragraph (2), the amendments made by this section shall not apply to transfers under any instrument in effect on or before the date of the enactment of this Act unless both spouses (or former spouses) elect to have such amendments apply to transfers under such instrument. Any election under paragraph (2) or (3) shall be made in such manner, at such time, and subject to such conditions, as the Secretary of the Treasury or his delegate may by regulations prescribe.”