United States v. Davis

Holding

Transfer of appreciated property to a former spouse in satisfaction of marital property rights is a taxable disposition recognized at fair market value.

Facts

Davis transferred appreciated stock to his former wife in satisfaction of marital rights. He argued the transfer was a non-taxable division of marital property.

Reasoning

Justice Clark held that the transfer was a taxable disposition because the marital rights surrendered had a value equal to the fair market value of the property transferred. This holding was later overruled by statute via Section 1041, which now provides nonrecognition for transfers between spouses incident to divorce.