Farid-Es-Sultaneh v. Commissioner 160 F.2d 812 (2d Cir. 1947) Farid got engaged to Kresge (who founded the K-Mart Department Store chain). He gave her some stock worth $290 a share in case something happened to him before they got married. A little later Farid signed an ante-nuptial agreement (aka a pre-nup), saying that in exchange for the stock, she wouldn't claim any alimony or any of Kresge's property in case of divorce. At the time the ante-nuptial agreement was signed, the stock was worth $315 a share (and by the time it actually got put in her name, it was worth $330). They got married. Four years later, they got a divorce. Farid sold the stock. When she reported the sale to the IRS, there was a disagreement over the initial value (aka the basis) of the stock. The IRS argued that since the stock was a gift, the basis should be the value of the stock when Kresge acquired it (which was less than $5 a share). See 26 U.S.C. §1015 and Taft v. Bowers (278 U.S. 470 (1929)), which explain the carry over basis rule. Farid argued that the stock was consideration for her signing the pre-nup, it wasn't a gift at all. Therefore the basis should be the value of the stock when she signed the pre-nup ($315 a share). The Trial Court found for the IRS, Farid appealed. The Appellate Court reversed and found for Farid. The Appellate Court found that the initial promise Kresge made was contingent on his dying before he got married. Since he didn't die, he never really made a gift to Farid. The Court found that by signing the pre-nup and giving up her right to alimony, Farid was making a contract, so her acquisition of the stock wasn't a gift at all, it was part of a contract. The Court found that the basis for property acquired via contract is the value on of the property at the time the contract was signed (in this case $315).