A transfer of assets between spouses or former spouses that is “incident to the divorce” does not produce taxable income. Instead, the transfer is treated as a nontaxable gift that is excluded from the transferee spouse’s income, and the transferee spouse obtains a carryover basis for the property received. This means that the basis of the property to the transferee spouse is the same as the basis for the property in the hands of the transferor spouse. A transfer is “incident to the divorce” if it occurs within one year after the date on which the marriage ceases or is related to the cessation of the marriage.