Tax law for divorced couple?

Question

Donald and Marla Divorced. Part of the settlement included. 

Marla transferred to Donald corporate stock, a commercial building, and a personal residence. Donald transferred other property to Marla, but the fair market value of the property was $600,000 Less than the fair market value that Marla transferred to him. To make the settlement equal, Donald agreed to pay Marla $600,000, payable over 10 yrs at 8% interest.

Can Donald deduct the interest from his federal income tax return? He had been doing it as investment interest but the IRS disallowed the interest deduction, and classified it as nondeductible personal interest. I am thinking that he should be allowed the deduction as part of the settlement because he has had the benefit of the $600,000 worth of property for 10 yrs while the wife has had to wait for her $600,000. 

I need to find a section of the tax law to prove my claim and having trouble getting started.

Bostonian In MO · Accepted Answer

The disallowance of the interest deduction was proper.  Donald is not buying investment property with the monies being paid to his former spouse, he is simply making payment on the division of the marital estate.  The division of the marital estate has no tax consequences for either party.

chatsplas · Answer

NOPE
Distribution of property between couple as part of divorce settlement, even if not equal, has no tax consequences for either of them.
No interest deduction!!!

tro · Answer

as I understand it, there is no profit/gain/or loss in a divorce settlement and in that this installment payment agreement is part of the divorce, with no gain on either side, this is no investment for him and is no income for her

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Tax law for divorced couple?

3 Answers