3.Margaret, who is unmarried, makes a lifetime gift of a piece of productive rental property to her son, Luke. Margaret purchased the property 20 years ago for $150,000; however, in making the gift, Margaret retained the life estate over the property so that she may be entitled and continue to receive the rental income from the property. Assume that Margaret dies this year and the date of death value is $400,000. Further assume that Luke sells the house 10 months after his mothers death for $420,000. Which of the following is correct?

A. Lukes basis in the property is $400,000.

B. Lukes basis in the property is $150,000.

C. Luke will realize a gain of $270,000 on the sale transaction.

D. B and C. are correct.