Question:
Please explain the rules and theory of Section 2516?

Answer:
In the federal tax code, section 2516 exempts from the gift tax certain property settlements related to a divorce. The divorce must occur either up to one year before the settlement or up to two years after the settlement. The transfer is exempt if it it to settle a spouse's marital or property rights, or to provide for raising the children. You should consult an attorney for more specifics.