T.C. Mem o. 2 01 6- 11 3

UNITED STAT ES TAX COURT

JOSEP H R. BELOT, Peti ti on er v . COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 13 23 2- 13
. Fi le d J un e 1 3, 2 01 6.

Pet it io ne r an d M s. Be lo t fo rm edan d jo in tl y own edth ree bu si ne ss es du rin g the ir m arri ag e. They were di vo rcedin20 07
. Purs ua ntto th e se tt le m en t ag reem en t en te redin to at t he ti m e o f pe ti ti on er’s d iv or ce, the y ag reedto ownan d o pe rat e th e b us in es se s as equa l p artne rs . Whe n i t b ecame clearth atth ey were u nabl e to op erat e th e b us in es se s t og ethe r to th ei r m utua l s at is fact io n, M s. Be lo t fi le d a lawsu itag ai ns t p et it io ne r to ga inful l co nt ro l o ve r th e b us in es se s. In 20 08 , 16 m on th s af

te r th e in it ia l s et tl em en t an d d iv or ce, the y en te red in to a se tt le m en t ag reem en t u nd er wh ic h p et it io ne r tr an sf erre d h is in te res ts inth e b us in es se s t o M s. Be lo t i n e xc hang e fo r pa ym en t. Held : Th e d iv is io n o f pr op erty he lddu rin g the m arri ag e o f pe ti ti on er an d M s. Be lo t ac co m pl is he d b y

th e 2 00 8 s et tl em en t ag reem en t qua li fie s fo r no nr eco gn it io n treat m en t u nd er I.R.C . sec . 10 41
.- 2 -

[* 2] Jo hnJ. Eag an , forpe ti ti on er. Rac he l L. Sch iff

m an , Sha wnaA. Early, an d J am ie J. So ng , forres po nd en t.

MEMORANDUM OPINION COLVIN, Ju dg e: Res po nd en t d et erm in edth atpe ti ti on er h adde fic ie nc ie s o f $1 99 ,62 5 fo r 20 08 an d $ 28 7 fo r 20 10 an d i s l iabl e fo r pe na lt ie s u nd er s ect io n 66 62 (a) o f $3 9,9 25 for20 08 an d $ 57 for20 10 . After c on ces si on s, the is su e fo r de ci si on is whet he r pe ti ti on er’s s al e o f hi s i nt eres ts inth e m ari ta l b us in es se s t o M s. Bel otpurs ua ntto th e 2 00 8 s et tl em en t ag reem en t qua li fie s fo r no nr eco gn it io n tre atm en t u nd er s ect io n 1 04 1. W e h ol d tha t i t d oe s. 1 The parti es subm it te d thi s ca se ful ly sti pu la te d u nd er Ru le 12 2, re fle ct in g th ei r ag reem en t tha t the rel ev an t fa ct s co ul d b e p res en te d wi th ou t a t ria l. We gr an te d tha t m ot io n. 2

Sect io n re fere nc es are t o the Int ern al Rev enue Co de , as am en de d andin 1 effe ctforth e y ears at i ss ue . Rul e ref eren ces are t o the Tax C ou rt Rul es of P ract ic e an d P ro cedur e. W e h av e ro un de d m on et ary am ount s t o the ne ares t d ol lar. The bu rd enof p ro of

is ge ne ral ly on the tax pa y er, s ee Ru le 14 2( a), an d the 2 subm is si on of acas e und er Ru le 12 2 d oe s n otalt er tha t b ur de n, s ee Bo rch ers v. Co m m is si on er, 9 5 T.C. 8 2, 9 1 (1 99 0) , aff’d, 9 43 F.2d22 (8th C ir. 1 99 1)
.- 3 -

[* 3] Bac kg ro un d Pet it io ne r res id edinNew Jer se y when he fil edth e p et it io n. Pe ti ti on er an d Ms . Bel ot(hi s fo rm er s po us e) were m arri edfro m Ju ly 1, 19 89 , th ro ug h J anua ry 8, 20 07
. A. The Mari ta l Bu si ne ss es InSep te m

be r 19 89 pe ti ti on er an d M s. Be lo t o pe ne d atra ve li ng danc e sc ho ol , fo r whi chth ey

rep orte d i nc om e an d e xp en se s o n S ch edul e C, Pro fitor Lo ss Fro m Bu si ne ss . In 1 99 6 the y

in co rp or at edGot taDanc e, In c. (Go tt a Dan ce), i n New Je rs ey as aC co rp or at io n. It s p rimary bu si ne ss act iv ity

was the op erat io n o f da nc e stud io s. Fro m

th e ti m e o f it s i nc or

po rat io n thr ou ghMarc h 2 4, 2 00 6, M s. Be lo t was th e so le sh areh ol de r of

Got taDanc e. On M arch 6, 1 99 7, p et it io ne r an d M s. Be lo t fo rm edGot taDanc e Bo ut ique , LLC (Bo ut ique ). Its pri m ary bu si ne ss act iv ity was the ret ai l s al e o f da nc ewearan d
acce ss or ie s. Fro m

th e ti m e o f it s fo rm at io n thr ou gh May 22, 2 00 8, the y each
own ed50 % of B ou ti qu e. On J ul y 1, 1 99 9, p et it io ne r an d M s. Be lo t fo rm edJo be e Rea lty , LLC (Jo be e). Jo be e was tre at edas apartn ers hi p fo r Fed eral tax pu rp os es . Its pri m ary bu si ne ss act iv it ie s i nv ol ve d h ol di ng an d l eas in g re al est at e, in cl ud in g l eas in g d an ce s tu di os to Got taDanc e. Fro m

th e ti m e o f it s fo rm at io n thr ou gh Marc h 2 4, 2 00 6, M s. Be lo t- 4 -

[* 4] own ed49 % of J ob ee an d p et it io ne r own ed51 % of J ob ee. Pet it io ne r an d M s. Bel otjoi nt ly m ad e d eci si on s wi th res pe ctto Got taDanc e, Bo ut ique , andJo be e (b us in es se s) . Peti ti on er fo cu se d o n m an ag in g the fin an ci al asp ect s o f th e bu si ne ss es . Ms. Be lo t was pri m ari ly resp on si bl e fo r da nc e-re la te d a sp ect s o f th e bu si ne ss es , in cl ud in g i ns tru ct io n, h iri ng , tra in in g, re cru it m en t, an d p ayro ll
. B. The Div or ce an d the 20 07 Set tl em en t Ag reem en t In20 05 Ms . Bel othi redanatt orne y an d b eg anth e p ro ces s o f fi li ng for di vo rce f ro m pe ti ti on er. On J anua ry

24 , 20 06 , th e d iv or ce ac ti on co m m en cedin th e Supe rio r Co urt o f New Je rs ey , Cha nc ery Div is io n, Fam il y Part , Som ers et Co un ty (famil y

co urt). On M arch 24 , 20 06 , pet it io ne r an d M s. Be lo t s ig ne d aco ns en t o rd er wi th th e fam il y co urt. Purs ua ntto th atord er, the y equa li zedth ei r own ers hi p i nt eres ts in Got taDanc e an d J ob ee. Ms . Bel ottra ns ferr ed50 % of t he st oc k i n Go tt a Dan ce t o Pet it io ne r. Thi s tran sa ct io n i s re fle ct edina st oc kh ol de rs ag reem en t am on g Go tt a Dan ce, p et it io ne r, an d M s. Be lo t. Als o o n M arch 24 , 20 06 , pet it io ne r tr an sf erre d a 1% i nt eres t i n J ob ee t o M s. Be lo t. Thi s tran sa ct io n i s re fle ct edinanop erat in g ag reem en t am on g J ob ee, p et it io ne r, an d M s. Be lo t. On ce the se tra ns act io ns were
co m pl et e, pe ti ti on er an d M s. Be lo t ea chown eda 50 % in te res t i n B ou ti qu e, Got ta Dan ce, an d J ob ee.- 5 -

[* 5] On J anua ry

8, 2 00 7, the fam il y

co urt en te reda du al jud gm en t o f di vo rce. The fol lo win g d oc um en ts were at ta ch edto th e dua l ju dg m en t o f di vo rce: (1) a
se tt le m en t ag reem en t d at edJan ua ry 8, 2 00 7; (2) a fi na l co ns en t o rd er re gard in g
cu st od y an d p aren ti ng ti m e fi le d M arch 24 , 20 06 ; an d (3 ) a co ns en t o rd er fi le d o n Mar ch29 , 20 06 , whi chin cl ud edth e Got taDanc e st oc kh ol de rs ag reem en t an d the Jo be e o pe rat in g a gr eem en t. The du al jud gm en t o f di vo rce i nc or po rat eda pr op erty
se tt le m en t ag reem en t (2 00 7 s ettl em en t ag reem en t), wh ic h i nc lu de d the Marc h 2 00 6
co ns en t o rd er. C. The 20 08 Set tl em en t Ag reem en t On Se pt em

be r 21 , 20 07 , Ms . Bel otfil eda ve rif ie d c om pl ai ntforem erg en t
an d i nju nc ti ve an d o th er d am ag es an d re li ef ag ai ns t p et it io ne r an d Go tt a Dan ce. Ms . Bel otco nt en de d tha t p et it io ne r ha d m is m an ag edth e b us in es s an d s ou gh t t o
rem ov e p et it io ne r as di rect oran d e m pl oyee of Got taDanc e an d t o c om pe l h im to
se ll hi s s ha res of Go tt a Dan ce ei th er t o the co rp or at io n o r to Ms . Bel ot . On Ap ril 11 , 20 08 , pet it io ne r an d M s. Be lo t en te redin to a se tt le m en t ag reem en t (2 00 8 s ettl em en t ag reem en t) r eg ard in g the laws ui t. Pu rs ua ntto th e 2 00 8
se tt le m en t ag reem en t, Ms . Bel otag reedto pu rch as e fro m pe ti ti on er al l o f hi s in te res ts inGot taDanc e, Bo ut ique , andJo be e fo r a t ot al of $ 1,5 80 ,00 0, p ai d a s fo ll ows : (1 ) $9 00 ,00 0 t o b e p ai d a t cl os in g and(2) th e b al an ce o f $6 80 ,00 0,- 6 -

[* 6] ev id en cedby a pro m is so ry no te , payabl e in equa l m on th ly ins ta ll m en ts on th e fir stof e ach m on th be gi nn in g J un e 1 , 20 08 , ov er 1 0 years b eari ng in te res t atth e fix edrat e o f 5% o n the pri nc ip al am ou ntou ts tand in g. Th e am ou ntof e achm on th ly pa y m en t u nd er the pro m is so ry no te was $ 7,2 12 .46
. On M ay 22 , 20 08 , pet it io ne r an d M s. Be lo t ex ecu te d ast oc k and
m em be rs hi p i nt eres t p ur ch as e ag reem en t re ga rd in g the own ers hi p o f th e bu si ne ss es . The s to ck

an d m em be rs hi p i nt eres t p ur ch as e ag reem en t al lo cat edth e to ta l $ 1,5 80 ,00 0 a m on g the in te res ts inth e b us in es se s as fol lo ws: (1) $1 ,08 0,0 00 fo r th e in te res t i n Go tt a Dan ce; (2) $4 75 ,00 0 fo r th e in te res t i n J ob ee; an d (3 ) $2 5,0 00 forth e in te res t i n B ou ti qu e. Pet it io ne r’s ba si s i n e ach bu si ne ss is no t indi sp ut e. Pet it io ne r ex ecu te d ast oc k p owe r in stru m en t i n wh ic h h e so ld , as si gn ed , andtra ns ferr edhi s 5 00 sh ares of Go tt a Dan ce, rep res en ti ng a 50 % in te res t, t o M s. Be lo t. Pet it io ne r al so ex ecu te d an a ss ig nm en t o f m em be rs hi p in te res t i n wh ic h h e tr an sf erre d h is 50 % in te res t i n J ob ee an d 5 0% i nt eres t i n Bo ut ique to Ms . Bel ot . On Ju ly 18, 2 00 8, the ge ne ral equi ty court e nt ereda
co ns en t o rd er o f di sm is sa l i n the laws ui t.- 7 -

[* 7] Dis cu ss io n A. The Iss ue for

Deci si on The is su e fo r de ci si on is whet he r pe ti ti on er’s s al e to Ms . Bel otof h is in te res ts inth e m ari ta l b us in es se s p ur su an t t o the 20 08 set tl em en t ag reem en t qu al ifi es forno nr eco gn it io n treatm en t u nd er s ect io n 1 04 1. B. Sect io n 1 04 1 Sect io n 1 04 1 p ro vi de s: SEC. 1 04 1. TRANSFERS OF PROPERTY BETW EEN SPOUSES OR

INCIDENT TO DIVORCE. (a) Gen eral Ru le .--No ga inor l os s s ha ll be reco gn iz edon a tra ns fer o f pr op erty

fro m anin di vi du al to (orintru stforth e b en efi t of )-- (1 ) a s po us e, or

(2 ) a fo rm er s po us e, bu t o nl y if the tra ns fer i s i nc id en t t o the di vo rce. * * * * * * * (c) In ci de ntto Div or ce.-- Fo r pu rp os es of s ub se ct io n (a )(2 ), a tr an sf er of pro pe rty is i nc id en t t o the di vo rce i f su chtra ns fer- -(1 ) oc cu rs withi n 1 y ear a fte r th e d at e o n wh ic h the m arri ag e cea se s, o r (2 ) is rel at edto th e ces sa ti on of t he m arri ag e. Co ng res s en act edsec ti on 10 41 inres po ns e to Uni te d S tate s v . Davi s, 3 70 U.S. 65 (1 96 2) , inwhi chth e Supr em e Co urt h el d tha t a t ran sf er o f ap pr eci at edpro pe rty to a- 8 -

[* 8] sp ou se (ora fo rm er s po us e) i n e xc ha ng e fo r th e rel eas e o f m ari ta l cl ai m s
res ul ts inth e rec og ni ti on of g ai n t o the tra ns fero r. The Way s an d M ean s Co m mit te e Rep ort ac co m

pa nyin g the en actm en t o f se ct io n 1 04 1 p ro vi de d the fo ll owi ng reas on s fo r th e ch an ge :

The co m m it te e b el ie ve s tha t, i n g en eral , itis in ap pr op ria te to tax tra ns fers be twee n s po us es . This po li cy is alr eady

refl ect edinth e Co de ru le th atex em

pt s m ari ta l g ift s fr om

th e g ifttax , andrefl ect s the fact th ata hu sb an d andwife are a s in gl e eco no mic un it* * * Oft enth e [cu rren t] rul es ha ve pro ve d atrap fo r th e unwa ry , as, fo r ex am pl e, whe re the parti es vi ew pr op erty acqui reddurin g m arri ag e * * * as joi nt ly owne d, o nl y

to fin d tha t the equa l d iv is io n o f th e p ro pe rty up on di vo rce trig ge rs reco gn it io n o f ga in . [H.R. Rep t. No . 98 -4 32 (Part2), at14 91 (19 84 ), 19 84 U.S.C.C.A.N. 69 7, 1 13 4.] C. Tem

po rary Regu la ti on s Sect io n 1 .10 41 -1 T(b) , Q&A-7 , Tem po rary Inco m e Tax Reg s., 4 9 F ed . Reg
. 34 45 3 (Au g. 3 1, 1 98 4) (reg ul at io n) , pro vi de s the fol lo win g (we ha ve nu m be redth e
se nt en ces to faci li ta te ou r refe ren ces to th e reg ul at io n) : [1 ] A trans fer o f pr op erty is tre at edas r el at edto th e ces sa ti on of t he m arri ag e if

th e tr an sf

er i s p ur su an t t o adi vo rce o r se pa rat io n in st ru m en t, as de fin edinsec ti on 71 (b )(2 ), an d the tra ns fer o ccu rs no t m or e th an6 years a fte r th e d at e o n wh ic h the m arri ag e cea se s. [2 ] A di vo rce o r se pa rat io n i ns tru m en t i nc lu de s a m od ifi cat io n o r am en dm en t t o s uc h d ecre e o r in st ru m en t. [3 ] Any tran sf er n ot pu rs ua ntto a di vo rce o r se pa rat io n i ns tru m en t an d any tran sf er oc curri ng m or e th an6 years a fte r th e ces sa ti on of t he m arri ag e is pr es um edto be no t re late d t o the ces sa ti on of t he m arri ag e. [4 ] Thi s pr es um pt io n m ay

be reb ut te d o nl y

by sho win g tha t the tra ns fer was m ad e to effe ctth e d iv is io n o f pr op erty own edby the form er s po us es at- 9 -

[* 9] th e ti m e o f th e ces sa ti on of t he m arri ag e. [5 ] Fo r ex am pl e, th e pr es um pt io n m ay

be reb ut te d b y

sh owi ng th at(a) the tra ns fer was no t m ad e wit hi n the on e- an d s ix -y ear p eri od s d es cri be d abo ve be cau se of fact or s wh ic h h am

pe redanearl ie r tr an sf

er o f th e p ro pe rty, suc h a s le ga l o r bu si ne ss im

pe di m en ts to tra ns fer o r di sp ut es co nc ern in g the va lu e o f th e p ro pe rty owne d a t the ti m e o f th e ces sa ti on of t he m arri ag e, an d (b ) th e tr an sf er i s ef fect edpro m

pt ly after the im pe di m en t t o tran sf

er i s re m ov ed
. D. Ana lysis Pet it io ne r an d M s. Be lo t m ad e two att em pt s t o s at is fact or il y

di vi de th ei r
m ari ta l b us in es se s. Th e fi rs t at te m ptwas the 20 07 set tl em en t ag reem en t, i n wh ic h th ey ag reedto equa li ze the ir i nt eres ts inth e b us in es se s an d t o ru n the bu si ne ss es as pa rtn ers . The 2 00 7 s et tl em en t ag reem en t qui ck ly pro ve d uns at is fact ory . In the 20 08 (se co nd ) se tt le m en t ag reem en t, wh ic h s et tl eda lawsu itbro ug htby Ms. Bel ot , pe ti ti on er ag reedto sel l t o h er al l o f hi s i nt eres ts inth e m ari ta l b us in es se s i n
ex ch an ge forsp eci fie d p aym en ts . Res po nd en t d oe s n otco nt en d tha t the di vi si on of p ro pe rty un de r th e se co nd
se tt le m en t ag reem en t was no t “ m ad e to effec t the di vi si on of p ro pe rty owne d b y th e fo rm er s po us es at t he ti m e o f th e ces sa ti on of t he m arri ag e.” In st ead , res po nd en t
co nt en ds th atth e tr an sf

er u nd er the sec on d s et tl em en t ag reem en t d oe s n otqu al ify
un de r th e reg ul at io ns be cau se th e tr an sf er d idno t re la te to th e d iv or ce i ns tru m en t. W e d is ag ree. Re sp on de nt ’s con te nt io n tha t the di vi si on of m ari ta l p ro pe rty m us t- 10 -

[* 10 ] rel at e to th e d iv or ce i ns tru m en t i s b as edon th e fi rs t, s eco nd , andth ird
se nt en ces of the reg ul at io n (wh ic h re fer t o the di vo rce i ns tru m en t) b utov erl oo ks th e fo urth sen te nc e. The thi rdsen te nc e o f th e reg ul at io n p ro vi de s tha t the re i s a pr es um pt io n tha t s ect io n 1 04 1 d oe s n otap pl y to “ [a]ny tra ns fer n otpu rs ua ntto a di vo rce o r se pa rat io n i ns tru m en t” . Con si st en t wi th sec ti on 10 41 , th e fo urth
se nt en ce m ak es cle ar tha t the pre su m pt io n m ay

be reb ut te d “ by sho win g tha t the tra ns fer was m ad e to effe ctth e d iv is io n o f pr op erty own edby the form er s po us es at th e ti m e o f th e ces sa ti on of t he m arri ag e.” See , e.g., Yo un g v . Comm is si on er, 2 40 F.3 d 3 69 , 37 4 (4 th Cir . 20 01 ), aff’g 1 13 T.C. 15 2 (1 99 9) ; s ee al so Barnum v. Co m mis si on er, 1 9 T.C. 4 01 , 40 7 (1 95 2) . Peti ti on er h as m ad e th atsh owi ng he re. Res po nd en t co nt en ds th atpe ti ti on er d idno t re bu t the pre su m pt io n a s pr ov id edinth e fo urth sen te nc e o f th e reg ul at io n b ecau se pe ti ti on er’s tran sf er o f hi s in te res ts inth e b us in es se s t o M s. Be lo t und er the sec on d s et tl em en t ag reem en t was
no t due to “ le ga l o r bu si ne ss im pe di m en ts th atpre ve nt eda tr an sf er ca ll edforby the di vo rce d ecre e”. Res po nd en t b as es th atarg um en t o n the fif th sen te nc e o f th e reg ul at io n. We di sa gr ee wi th res po nd en t’s ar gu m en t b ecau se th e fi fth sen te nc e pr ov id es ex am

pl es an d d oe s n otcrea te a requi rem en t tha t p et it io ne r m us t s at is fy

to reb utth e p res um

pt io n.- 11 -

[* 11 ] Res po nd en t p oi nt s o utth atth e d iv or ce s et tl em en t re so lv edall of t he pro pe rty is su es be twee n p et it io ne r an d M s. Be lo t. Ho wev er, n ei th er s ect io n 1 04 1 n orth e reg ul at io ns li m it s ap pl ic at io n o f se ct io n 1 04 1 t o o ne , or the fir st , di vi si on of m ari ta l pr op erty . Res po nd en t p oi nt s o utth atinform an d i n s ub st an ce the di vi si on of t he
m ari ta l b us in es se s m ad e b y th e se co ndset tl em en t ag reem en t was a sa le . Howev er,
ne ithe r se ct io n 1 04 1 n orth e reg ul at io ns bars ap pl ic at io n o f se ct io n 1 04 1 t o di vi si on s o f m ari ta l p ro pe rty acco m pl is he d thr ou gh sal es . See Yo un g v . Co m mis si on er, 2 40 F.3dat 3 74 -3 75 . Res po nd en t ch arac te riz es Ms . Bel ot ’s di ss at is fact io n wi th th e fi rs t s et tl em en t ag reem en t as a bu si ne ss di sp ut e. It i s tru e th atth e m ari ta l p ro pe rty at is su e co ns is ts of s to ckinbu si ne ss es op erat edby pe ti ti on er an d M s. Be lo t dur in g andaft er the ir m arri ag e. Howev er, s ect io n 1 04 1
an d the reg ul at io ns canap pl y to m ari ta l p ro pe rty whic h c on si st s o f bu si ne ss -rel at ed pr op erty . Res po nd en t co nt en ds th atth e fac t M s. Be lo t fi le d the 20 08 laws ui t i n the
supe rio r co urt ci vi l p artrathe r th anth e fam il y co urt (wh ic h h adjuri sd ic ti on ov er pe ti ti on er’s d iv or ce) s ho ws tha t the laws ui t co nc ern eda bu si ne ss di sp ut e, no t a
m ari ta l d is pu te . W e d is ag ree. Th e ap pl ic at io n o f se ct io n 1 04 1 t o atra ns fer
res ul ti ng fro m

th e se tt le m en t o f a l aws ui t i s n otde te rm in edby the for um inwhi ch th e la wsu itis fil ed . Young v. Co m m is si on er, 2 40 F.3dat 3 75
.- 12 -

[* 12 ] Inco ns id eri ng res po nd en t’s ar gu m en ts whi ch , if ad op te d, wo ul d a dd
co nd it io ns to qu al ifi cat io n u nd er s ect io n 1 04 1 tha t ar e n otinth e st atut e o r th e reg ul at io ns , we are re m in de d o f th e fo ll owi ng pa ss ag e fro m th e Co urt o f App eal s’ op in io n i n Yo un g:

The po li cy

an im at in g § 10 41 is cle ar. Co ng res s h as ch os ento “ tre ata hu sb an d andwife [an d fo rm er h us ba ndan d wi fe ac ti ng in ci de ntto di vo rce] as o ne eco no m ic un it , andto de fer, b utno t el im in at e, th e rec og ni ti on of a ny gai n o r lo ss on in te rs po us al pro pe rty tra ns fers un ti l the pro pe rty is c on ve y edto a th irdparty outs id e th e eco no m ic un it .” Bl at t v . Comm is si on er, 1 02 T.C. 77 , 80 , 19 94 W L 26 30 6 (1 99 4) (em

ph as is ad de d) . See al so H.R.Rep . No. 9 8- 43 2, at 14 91 (19 84 ), rep rin te d i n 1 98 4 U.S.C.C .A.N. 113 4. Thus , no tax ab le ev en t o ccu rredan d n o g ai n was real iz edby eith er Mr . or M rs . You ng un ti l M rs . You ng so ldth e 5 9 a cres to a th irdparty. [Id.] Res po nd en t u rg es us to di sr eg ardth e h ol di ng inYou ng on th e b as is of al le ge d fa ctua l d is ti nc ti on s b etweenYou ng an d thi s ca se , i.e., th atinYou ng , th e
se co ndset tl em en t ag reem en t re so lv eda di sp ut e co nc ern in g the term s an d ob li ga ti on s o f th e fi rs t s et tl em en t ag reem en t (r el at in g t o the di ss ol ut io n o f th ei r
m arri ag e), b uthe re the 20 08 set tl em en t ag reem en t d idno t re so lv e a d is pu te
co nc ern in g the term s an d o bl ig at io ns of t he 20 07 set tl em en t ag reem en t. We di sa gr ee tha t the cas es are d is ti ng ui sh ab le on th atba si s. Inbo th Young an d h ere, a fo rm er s po us e al le ge d s ho rtc om in gs with i m pl em en ta ti on of t he fir stset tl em en t ag reem en t b y

th e o th er s po us e, an d a s a r es ul t i n b ot h c as es th e p art ie s n eg ot ia te d a- 13 -

[* 13 ] sec on d s et tl em en t ag reem en t em pl oyin g d iff

eren t t erm s fo r di sp os it io n o f th ei r m ari ta l as se ts th anwere co nt ai ne d i n the ir f irs t s ettl em en t ag reem en t. The tra ns fers m ad e p ur su an t t o the sec on d s et tl em en t ag reem en ts inYoung an d h ere
were m ad e (as requi redby the fou rth sen te nc e o f th e reg ul at io n) to “ effe ctth e di vi si on of p ro pe rty owne d b y th e fo rm er s po us es at t he ti m e o f th e ces sa ti on of t he
m arri ag e”; an d a s re qu ire d b y sec ti on 10 41 were “ rel at edto th e ces sa ti on of t he
m arri ag e.” 3

The Co urt o f App eal s i n Yo un g v . Comm is si on er, 2 40 F.3d36 9, 3 74 (4t h 3 Ci r. 20 01 ), aff’g 1 33 T.C. 15 2 (1 99 9) , referredto Pri v. Ltr. Ru l. 9 30 60 15 (Feb . 12 , 19 93 ) (ru li ng ) an d p oi nt edou t tha t l et te r ru li ng s m ay no t b e ci te d a s p rece de nt . See s ec. 6 11 0( k) (3 ). In the rul in g, the Co m m is si on er s ai d s ec. 1 04 1 d oe s n ot ap pl y to th e tr an sf

er o f on e sp ou se ’s in te res t i n the joi nt ly owne d m ari ta l h ou se to th e o th er s po us e whe re the sp ou se s h adpre vi ou sl y ag reedth atth e o th er s po us e ha d arig htto co nt in ue to li ve inth e h ou se un de r vario us cir cu m st an ces or t o s el l th e h ou se to a th irdparty. T he si tu at io n i n the rul in g i s d is ti ng ui sh ab le fro m th at inYou ng . Young v. Co m m is si on er 2 40 F.3dat 3 74 -3 75 . It al so is di st in gu is habl e fro m th e si tu at io n h ere, wh ere the re was no pri orag reem en t t o aut ho riz e o ne of t he fo rm er s po us es to sel l the m ari ta l b us in es se s t o ath irdparty. Peti ti on er an d M s. Bel ot ’s own ers hi p o f th e m ari ta l b us in es se s was equa li zedby the fir stset tl em en t ag reem en t, b utso on pe ti ti on er ag reedto tra ns fer h is en ti re i nt eres t i n the m ari ta l bu si ne ss es to Ms . Bel ot . As di sc us se d i n the tex t, thi s s itua ti onqu al ifi es forsec . 10 41 tre atm en t u nd er the term s o f th e reg ul at io ns . W e al so no te th atth e p ol ic y of se c. 10 41 (to “ tre ata hu sb an d andwife [an d fo rm er h us ba ndan d wi fe ac ti ng in ci de ntto di vo rce] as o ne eco no m ic un it , andto de fer, b utno t el im in at e, th e reco gn it io n o f an y

ga inor l os s o n i nt ers po us al pro pe rty tran sf ers un ti l the pro pe rty is co nv ey edto a th irdparty ou ts id e th e eco no m ic un it ”, se e supr a p . 12 ) is well se rv edby app li cat io n o f th atsec ti on he re.- 14 -

[* 14 ] E. Co nc lu si on W e co nc lu de th atth e so le pu rp os e o f th e 2 00 8 (s eco nd ) se tt le m en t ag reem en t was to tra ns fer p ro pe rty “ in ci de ntto th e d iv or ce” a s tha t p hr as e is us ed insec ti on 10 41 an d the reg ul at io ns th ereu nd er. Thu s, the tra ns fer a t i ss ue he re qu al ifi es forno nr eco gn it io n treatm en t u nd er s ect io n 1 04 1.
Decis io n wi ll be en te redfor pe ti ti on er.