You will need to read the 1930 Supreme Court case, Lucas v. Earl and also IRC Section 1015. Both are easily found with a Google search.

You must read the primary authoritythat is, the section of the tax law and the actual text of the case.

You can find other peoples explanations of these items. That is a secondary source. Read the full text of the case.

Unless you are quite gifted I will be able to tell from your write-up, whether you read the actual case and section of the tax law.

Then explain why:

1. A parent cannot shift income earned by the parents services to a child.
2. Why a parent who owns stock with a fair market value of $100,000 and a tax basis of $40,000 can gift that stock to an adult child and shift the capital gain to the child.

Your answer should include the lessons learned from Lucas v. Earl and also how Section 1015 leads to the result that you explain.