Tax Legal Services · Primary-source case analysis

Taft v. Bowers: A Donee Could Be Taxed on Pre-Gift Appreciation

By Aneeta Mishra and Timothy Chan

Published August 30, 2026

Taft v. Bowers concerned stock that appreciated while held by the donor, was transferred by gift, appreciated further, and was then sold by the recipient.

The statute prescribed carryover basis

The Revenue Act measured the donee’s gain from the donor’s acquisition cost when property acquired by gift was later sold.

The gift did not erase the built-in gain

The recipient accepted the property subject to the tax consequences attached to its appreciation and realized the gain on sale.

Congress could tax the full realized appreciation

The Court rejected the constitutional claim that only post-gift appreciation could be income to the donee.

Sale was the operative realization event

The case did not tax the mere receipt of a gift; it addressed gain recognized when the donee disposed of appreciated property.

Key takeaways

• Obtain the donor’s acquisition date and adjusted basis.
• Trace post-acquisition adjustments before calculating gain.
• Distinguish lifetime gifts from inherited property basis rules.
• Document the disposition event and current statutory exceptions.