Sch E rental properties- Transfer of ownership thru Quit claim deed

[RR Reed]

I have two clients who co-own 3 rental properties 50/50 (originally were MFJ, but divorced along the way and split ownership half ways). In late 2020, they decided to split properties as 2 and 1 (ex wife got 2 bldgs and ex husband got 1) by just removing their names from the respective titles of property. this sounds like Quit claim deed to me as there was no exchange of money. I am learning from online research I may have to file form 709 for each of them. Is that correct and how do I adjust tax basis in the asset worksheet for the property received? And how do I dispose the property given away?

[BobKamman]

Looks like a sale to me. 

Edited to add:  Might qualify as a 1031 exchange.  

[RR Reed]

Sale would make it a taxable transaction and account for it like a regular sale. What about the online literature where some websites call for Form 709? Any thoughts?

[TaxGuyBill]

A 709 is for a Gift.  This was not a gift.  They TRADED their 50% ownership for some ownership in another property.  That is a sale.

But as Bob pointed it, it may qualify as a 1031 Exchange.

[sjrcpa]

Was this done pursuant to the marital property settlement agreement?

[Terry53029]

Not sure, but would section 1041 be applicably

[RR Reed]

No, they divorced/separated long time ago

[Terry53029]

If divorced a long time I would look into 1031 exchange as @BobKamman suggested, doesn't sound like a gift is involved 

[RR Reed]

Thank you all for your inputs! I will look into 1031 exchange.