Taft's (P) father gave her shares of Nash Motor Company. The stock was more valuable when the father gave them to P than the father's acquisition cost. P sold them during 1923 for more than the market value when the gift was made. The IRS wanted income tax on the difference in the acquisition price and the eventual sales price. P paid and then sued to recover the monies. The basic facts of the transaction are that the stock was bought by the father in 1916 for $1,000 and held until 1923 when the fair market value became $2,000 and then they were given to P who then sold them for $5,000. The IRS wanted to recover the full $4,000 in profits. P maintains that tax on only $3,000 was due; the appreciation during her ownership. Thus, D assessed the tax on the value of the acquisition of the donor and P wanted the tax assessed at the fair market value of the stock on the date of transfer. The district court ruled for P, and so did the Court of Appeals. This appeal resulted.

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