Grady gives a watch to his nephew, Fred. Grady's original basis in the watch is

$100

and the value of the watch on the date of the gift is

$1,000

. Fred keeps the watch for a year or two and then sells it for

$1,200

. What is Fred's basis in the watch for computing his realized gain or loss?\ a. $0. It's a gift so Fred has no basis.\ b.

$100

. Grady's basis carries over to Fred.\ c.

$1,000

. Fred takes basis as the market value on the date of the gift.\ d.

$1,200

. Fred's basis should result in no gain or loss on a gift property.