diff --git a/OpenSim/Region/CoreModules/Framework/InventoryAccess/InventoryAccessModule.cs b/OpenSim/Region/CoreModules/Framework/InventoryAccess/InventoryAccessModule.cs
index c4a42bcecc..b4771fd2ca 100644
--- a/OpenSim/Region/CoreModules/Framework/InventoryAccess/InventoryAccessModule.cs
+++ b/OpenSim/Region/CoreModules/Framework/InventoryAccess/InventoryAccessModule.cs
@@ -556,6 +556,9 @@ namespace OpenSim.Region.CoreModules.Framework.InventoryAccess
 
             if (remoteClient != null && (remoteClient.AgentId != so.RootPart.OwnerID) && m_Scene.Permissions.PropagatePermissions())
             {
+                // Changing ownership, so apply the "Next Owner" permissions to all of the
+                // inventory item's permissions.
+
                 uint perms = effectivePerms;
                 PermissionsUtil.ApplyFoldedPermissions(effectivePerms, ref perms);
 
@@ -570,6 +573,13 @@ namespace OpenSim.Region.CoreModules.Framework.InventoryAccess
             }
             else
             {
+                // Not changing ownership.
+                // In this case we apply the permissions in the object's items ONLY to the inventory
+                // item's "Next Owner" permissions, but NOT to its "Current", "Base", etc. permissions.
+                // E.g., if the object contains a No-Transfer item then the item's "Next Owner"
+                // permissions are also No-Transfer.
+                PermissionsUtil.ApplyFoldedPermissions(effectivePerms, ref allObjectsNextOwnerPerms);
+
                 item.BasePermissions = effectivePerms;
                 item.CurrentPermissions = effectivePerms;
                 item.NextPermissions = allObjectsNextOwnerPerms & effectivePerms;