Real Estate & Asset Division Flashcards

In a community property state, a spouse inherits $80,000 during the marriage and uses it to purchase a vacation home. How is the vacation home classified?

Answer: Separate property of the inheriting spouse if kept traceable and separate

In community property states, inheritances are separate property; a vacation home purchased entirely with traceable inherited funds retains its separate property character.

What is a QDRO and why is it irrelevant to the division of real estate?

Answer: A Qualified Domestic Relations Order divides retirement accounts, not real estate, which is transferred by deed

A QDRO is the legal mechanism for dividing qualified retirement plans tax-free; real estate is transferred between divorcing spouses via a deed, not a QDRO.

A spouse is awarded the family home in a divorce settlement. What step is essential to protect their ownership interest and clear the other spouse's claim?

Answer: Recording a deed conveying the property solely to the awarded spouse with the county recorder

Recording a properly executed deed (such as a quitclaim or grant deed) with the county recorder transfers legal title and provides constructive notice of the ownership change.

How does the 'active appreciation' vs. 'passive appreciation' distinction affect classification of separate property during marriage?

Answer: Active appreciation due to marital effort or funds may be marital property; passive market appreciation remains separate

Courts in many states distinguish between appreciation resulting from a spouse's marital efforts (active — marital) and appreciation due to market forces alone (passive — separate), affecting how the gain is divided.

When divorcing spouses agree to sell the marital home and split proceeds, but one spouse refuses to cooperate with the sale, what legal tool can the court use?

Answer: A partition action or appointment of a commissioner to force the sale

Courts can order a partition sale or appoint a special commissioner with authority to execute deeds and consummate the sale when one co-owner refuses to cooperate.

What is the tax basis that a spouse receiving property in an incident-to-divorce transfer under IRC Section 1041 inherits?

Answer: The transferring spouse's adjusted basis in the property

Under IRC Section 1041, property transferred between spouses in a divorce is tax-free to the transferor, and the recipient takes the transferor's adjusted basis — not fair market value.

A marital home has a $600,000 fair market value and a $200,000 mortgage. Spouse A receives the home as her equitable share. What is the net equity value used for equalization purposes?

Answer: $400,000

Net equity is calculated as fair market value minus outstanding mortgage balance: $600,000 − $200,000 = $400,000, which represents the value received by spouse A.