This comes under Code Section 6016, “Relief for Divorcing Couples Who Think The Rules Should Not Apply To Them.” If the divorce is not yet final, the property settlement is likely still just a proposal. Be on the lookout for them getting back together next month. Watch out for the husband, though, you know the type – went to a seminar, figured the answer to all problems is a separate LLC for each rental. (You know they’re not in California, paying LLC taxes.) The partnership returns were probably a way to avoid IRS audits – whoever heard of a 1065 audit, outside of abusive tax shelters and TEFRA?

Are there carryover losses? Is she filing MFS, or does she qualify for HH? When the tenants pay their rent, where does the money go? If the hot water heater goes out tomorrow on “her” property, whom do they call?