Final answer:
Bob and his ex-wife's related gross income from the transfer of their house during their divorce is $0 for both of them, as property transfers incident to divorce are non-recognition events. Bob's wife inherits the house at Bob's original basis of $100,000, which is used to calculate capital gains upon future disposal of the property.
Step-by-step explanation:
When a divorce occurs, assets such as a house are often divided between the parties involved. In the case mentioned, when Bob and his former wife divorced, his ex-wife received sole ownership of their previously jointly owned home. At that time, the house had a basis of $100,000, which refers to the original cost of the property for tax purposes. However, the fair market value of the home was $200,000.
In terms of gross income related to the transaction, if the transfer of property is incident to the divorce (meaning it's related to the cessation of the marriage), there is typically no immediate recognition of income for either party. This is in accordance with IRS Section 1041. Thus, Bob's related gross income from the transfer is $0, as he is not recognizing any gain or loss on the transfer. Similarly, Bob's wife's related gross income is also $0 at the time of transfer.
After the transfer, Bob's wife's basis in the home would generally be the same as it was before the transfer, $100,000. This is because the transfer of property between spouses or incident to divorce is a non-recognition event for tax purposes. The basis carries over from one spouse to the other, and no gain or loss is recognized until the spouse who receives the property sells it. At that point, they would realize a gain or loss based on the difference between the sale price and the basis ($100,000 in this case).