Items can be wrapped into gifts using wrapping paper such as [Red Ribboned Wrapping Paper]. Such items then become a gift item such as [Red Ribboned Gift].

The problem is the wrapped item is not updated into a gift: the icon remains the same and the item is not moved to its category (assuming that there is a category for gifts). Only the tooltip seems to be updated.
The same issue occurs in reverse, when a gift is opened, the item keeps showing as a wrapped gift and still shows up in the wrong category.

I am unable to reproduce this on Retail. If this is still happening for you, can you open a new bug using the bug template?

Thanks!

The bug seems to be specific to battle pets. I raised issue #647 with more details.