Detailed Answer
(c) The requirement is to determine Ruth’s recognized
loss if she sells the stock received as a gift for $7,000. Since the
stock’s FMV ($8,000) was less than its basis ($10,000) at date of
gift, Ruth’s basis for computing a loss is the stock’s FMV of
$8,000 at date of gift. As a result, Ruth’s recognized loss is $8,000
– $7,000 = $1,000.