## Step 1: Determine Porter's Basis in the Stock When property is received as a gift, the recipient's basis is generally the donor's basis (**carryover basis**), unless the fair market value (FMV) at the date of the gift is less than the donor's basis and the recipient later sells it for a loss. - **Donor's Basis (Aunt Eltie):** $4,500 - **FMV at Gift Date:** $4,000 Since the FMV ($4,000) is less than the donor's basis ($4,500), a special rule applies if the stock is sold at a loss. For loss calculation, the basis is the **FMV at the date of the gift**. **Explanation:** If sold at a gain, use the donor's basis. If sold at a loss, use the FMV at the date of the gift. --- ## Step 2: Calculate Recognized Gain or Loss - **Sale Price:** $4,200 - **Basis to Use (for loss):** $4,000 Since $4,200 (sale price) is between $4,000 (FMV at gift date) and $4,500 (donor's basis), **no gain or loss is recognized**. **Explanation:** If the sale price is between the donor's basis and the FMV at the date of the gift, **no gain or loss is recognized**. --- ## Final Answer **Porter's recognized gain or loss is $.**