Because the income was an accrued and unrecognized interest rather than a gain

Because the income was an accrued and unrecognized

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to defer the recognition of the gain or loss upon the spouse's disposal of the property. Becausethe income was an accrued and unrecognized interest rather than a gain, § 1041 did not shieldthe income from recognition. The deferred, accrued interest from the date of the originalissuance of the bonds to the date of the transfer was includible in the taxpayer's gross income.The interest from the date of the transfer to the date of redemption was includible in theformer spouse's gross income. The former spouse's basis in the bonds was equal to thetaxpayer's basis in the bonds plus the taxpayer's interest income.
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