Read 267(a)(1), (b)(1), (c)(4) and (d). Now assume the following facts. Ernst, the father of Allegra, owns stock that has a basis of $1,500.

1. If Ernst sells it to Allegra for $1,500, although it is worth $2,000, how much gain or loss will Ernst report for Federal Income Tax purposes, and what will be Allegra's basis in the property?
2. Ernst instead sells it to her for $1,000 (its then value) and Allegra sells the stock a few years later for $1,200. What is her basis and taxable gain, if any?
3. Same as "2 but the resale price is instead $1,800. What is her basis and taxable gain, if any?
4. If you had the power, would you amend 267 to include a tax avoidance requirement, or would you leave it as it is, potentially disallowing losses and deductions claimed by innocent taxpayers?