This section contains the nature of the case and procedural background.

In 1972 Diedrich made gifts of 85,000 shares of stock to their three children by direct transfers and trusts. The gifts were subject to the donees paying the federal and state gift taxes. There is no dispute over the amount of the gift tax due. The gift tax paid was $69,992. The basis in the transferred stock was $51,073. The court of Appeals Eighth Circuit held that the donor realized income. Diedrich appealed.

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