LO.3 Natalie receives an original Matisse painting as a gift from her aunt. At the date of the gift, the adjusted basis of the painting is $825,000, and its fair market value is

$1,120,000. Her aunt paid gift tax of $392,000.

a. What is Natalie’s adjusted basis in the painting?

b. If the fair market value of the painting at the date of the gift is $824,000 (not

$1,120,000), what is Natalie’s adjusted basis?