Jacob and Emily were co-owners of a personal residence. As part of their divorce agreement, Emily paid Jacob cash for his interest in the personal residence. This cash payment results in a taxable gain to Jacob if he receives more cash than his share of the cost of the residence
a. True
b. False
Indicate whether the statement is true or false
False
RATIONALE: Property transfers incident to a divorce are classified as a property settlement rather than as alimony. Moreover, the property settlement is nontaxable to Jacob, and Emily's basis in the interest purchased from Jacob is the same as Jacob's basis in the residence.
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