diff --git a/OpenSim/Region/CoreModules/Framework/InventoryAccess/InventoryAccessModule.cs b/OpenSim/Region/CoreModules/Framework/InventoryAccess/InventoryAccessModule.cs
index aa5d3819d6..010482374c 100644
--- a/OpenSim/Region/CoreModules/Framework/InventoryAccess/InventoryAccessModule.cs
+++ b/OpenSim/Region/CoreModules/Framework/InventoryAccess/InventoryAccessModule.cs
@@ -1141,6 +1141,12 @@ namespace OpenSim.Region.CoreModules.Framework.InventoryAccess
                             part.OwnerID = item.Owner;
                             part.RezzerID = item.Owner;
                             part.Inventory.ChangeInventoryOwner(item.Owner);
+
+                            // This applies the base mask from the item as the next
+                            // permissions for the object. This is correct because the
+                            // giver's base mask was masked by the giver's next owner
+                            // mask, so the base mask equals the original next owner mask.
+                            part.NextOwnerMask = item.BasePermissions;
                         }
 
                         so.ApplyNextOwnerPermissions();
@@ -1152,10 +1158,8 @@ namespace OpenSim.Region.CoreModules.Framework.InventoryAccess
                         {
                             if ((item.Flags & (uint)InventoryItemFlags.ObjectHasMultipleItems) == 0)
                             {
-                                if ((item.Flags & (uint)InventoryItemFlags.ObjectOverwriteEveryone) != 0)
-                                    part.EveryoneMask = item.EveryOnePermissions & part.BaseMask;
-                                if ((item.Flags & (uint)InventoryItemFlags.ObjectOverwriteNextOwner) != 0)
-                                    part.NextOwnerMask = item.NextPermissions & part.BaseMask;
+                                part.EveryoneMask = item.EveryOnePermissions & part.BaseMask;
+                                part.NextOwnerMask = item.NextPermissions & part.BaseMask;
                             }
                         }
                     }
diff --git a/OpenSim/Region/Framework/Scenes/Scene.Inventory.cs b/OpenSim/Region/Framework/Scenes/Scene.Inventory.cs
index 9c8dbb69f9..cb06540de5 100644
--- a/OpenSim/Region/Framework/Scenes/Scene.Inventory.cs
+++ b/OpenSim/Region/Framework/Scenes/Scene.Inventory.cs
@@ -627,6 +627,7 @@ namespace OpenSim.Region.Framework.Scenes
             itemCopy.AssetType = item.AssetType;
             itemCopy.InvType = item.InvType;
             itemCopy.Folder = recipientFolderId;
+            itemCopy.Flags = item.Flags;
 
             if (Permissions.PropagatePermissions() && recipient != senderId)
             {
@@ -643,7 +644,7 @@ namespace OpenSim.Region.Framework.Scenes
                 //
                 // Transfer
                 // Copy
-                // Modufy
+                // Modify
                 uint permsMask = ~ ((uint)PermissionMask.Copy |
                                     (uint)PermissionMask.Transfer |
                                     (uint)PermissionMask.Modify);
@@ -718,6 +719,10 @@ namespace OpenSim.Region.Framework.Scenes
                 itemCopy.BasePermissions = basePerms;
                 itemCopy.CurrentPermissions = ownerPerms;
                 itemCopy.Flags |= (uint)InventoryItemFlags.ObjectSlamPerm;
+                // Need to clear the other inventory slam options.
+                // That is so we can handle the case where the recipient
+                // changes the bits in inventory before rezzing
+                itemCopy.Flags &= ~(uint)(InventoryItemFlags.ObjectOverwriteBase | InventoryItemFlags.ObjectOverwriteOwner | InventoryItemFlags.ObjectOverwriteGroup | InventoryItemFlags.ObjectOverwriteEveryone | InventoryItemFlags.ObjectOverwriteNextOwner);
 
                 itemCopy.NextPermissions = item.NextPermissions;
 
@@ -767,9 +772,8 @@ namespace OpenSim.Region.Framework.Scenes
 
             itemCopy.GroupID = UUID.Zero;
             itemCopy.GroupOwned = false;
-            itemCopy.Flags = item.Flags;
-            itemCopy.SalePrice = item.SalePrice;
-            itemCopy.SaleType = item.SaleType;
+            itemCopy.SalePrice = 0; //item.SalePrice;
+            itemCopy.SaleType = 0; //item.SaleType;
 
             IInventoryAccessModule invAccess = RequestModuleInterface<IInventoryAccessModule>();
             if (invAccess != null)
@@ -1251,9 +1255,11 @@ namespace OpenSim.Region.Framework.Scenes
                 agentItem.CurrentPermissions = agentItem.BasePermissions;
 
                 agentItem.Flags |= (uint)InventoryItemFlags.ObjectSlamPerm;
+                agentItem.Flags &= ~(uint)(InventoryItemFlags.ObjectOverwriteBase | InventoryItemFlags.ObjectOverwriteOwner | InventoryItemFlags.ObjectOverwriteGroup | InventoryItemFlags.ObjectOverwriteEveryone | InventoryItemFlags.ObjectOverwriteNextOwner);
                 agentItem.NextPermissions = taskItem.NextPermissions;
                 agentItem.EveryOnePermissions = taskItem.EveryonePermissions & (taskItem.NextPermissions | (uint)PermissionMask.Move);
-                agentItem.GroupPermissions = taskItem.GroupPermissions & taskItem.NextPermissions;
+                // Group permissions make no sense here
+                agentItem.GroupPermissions = 0;
             }
             else
             {
@@ -1261,7 +1267,7 @@ namespace OpenSim.Region.Framework.Scenes
                 agentItem.CurrentPermissions = taskItem.CurrentPermissions;
                 agentItem.NextPermissions = taskItem.NextPermissions;
                 agentItem.EveryOnePermissions = taskItem.EveryonePermissions;
-                agentItem.GroupPermissions = taskItem.GroupPermissions;
+                agentItem.GroupPermissions = 0;
             }
 
             message = null;
diff --git a/OpenSim/Region/Framework/Scenes/SceneObjectPart.cs b/OpenSim/Region/Framework/Scenes/SceneObjectPart.cs
index b97cceb2bb..99be06bd01 100644
--- a/OpenSim/Region/Framework/Scenes/SceneObjectPart.cs
+++ b/OpenSim/Region/Framework/Scenes/SceneObjectPart.cs
@@ -5242,6 +5242,7 @@ SendFullUpdateToClient(remoteClient, Position) ignores position parameter
             BaseMask &= NextOwnerMask | (uint)PermissionMask.Export;
             OwnerMask &= NextOwnerMask;
             EveryoneMask &= NextOwnerMask | (uint)PermissionMask.Export;
+            GroupMask = 0; // Giving an object zaps group permissions
 
             Inventory.ApplyNextOwnerPermissions();
         }
diff --git a/OpenSim/Services/UserAccountService/UserAccountService.cs b/OpenSim/Services/UserAccountService/UserAccountService.cs
index 7120aeb16e..f6b003a1ad 100644
--- a/OpenSim/Services/UserAccountService/UserAccountService.cs
+++ b/OpenSim/Services/UserAccountService/UserAccountService.cs
@@ -947,7 +947,6 @@ namespace OpenSim.Services.UserAccountService
             if (item.InvType == (int)InventoryType.Object)
             {
                 uint perms = item.CurrentPermissions;
-                PermissionsUtil.ApplyFoldedPermissions(item.CurrentPermissions, ref perms);
                 item.CurrentPermissions = perms;
             }