1. It is unlikely that Odom is attempting to compensate his daughter; he gave her the car out of affection and respect for her accomplishments, and it therefore constitutes an excludable gift.

2. The receipt of the stock is a gift, the value of which is excluded from Zane's income. However, the exclusion applies only to the receipt of the gift; any subsequent earnings on the gift property are subject to tax. Thus, Zane must include the $50 dividend in his taxable income. If the dividend had already been declared when Bob made the gift, Bob would have been taxed on the dividend under the assignment of income doctrine. Under such circumstances, the cash dividend would have been an additional gift.

3. On similar facts, in 1960 the Supreme Court held that the automobile did not constitute a gift, although both parties testified that nothing was owed between the two and that the automobile was meant to be a present. The Court felt that the nature of their past relationship indicated the automobile was either compensation for past customer leads or an inducement to Albert to continue providing such information in the future.

4. Elinor is not taxed on the $6,000 value of the stock received from the inheritance. However, she is taxed on the income received from the stock subsequent to its receipt and must include the $200 dividend in her gross income.

5. Elinor is taxed on the gain from the sale of the stock. Her taxable gain is $2,500 ($8,500-$6,000). Note that the $6,000 fair market value of the stock received from the estate becomes Elinor's basis. Because the value of the inheritance (in this case $6,000) must never be taxed, it is permanently excluded from income. Therefore, under the capital recovery concept, Elinor does not have income unless she receives more than $6,000 for the stock upon disposition.

6. The receipt of the $200,000 face value of