Which of the following can be deducted from the taxable basis of a gifted property when determining loss?

The fair market value on the date of the gift is the correct choice because it represents the amount that can be used to determine any potential loss incurred upon the sale of the gifted property. When a property is gifted, the recipient's basis for determining gain or loss when they sell the property is typically the donor's adjusted basis. However, if the property is sold at a loss, the basis for loss determination is the fair market value at the time of the gift.

When you assess the loss from the sale of the gifted property, you must consider the fair market value because it sets the ceiling for the deductibility of the loss. This means that if the property is sold for less than its fair market value at the time it was received as a gift, the amount below that fair market value can typically constitute a loss for tax purposes.