In 2019, Debbie receives stock as a gift from her uncle, Jerry. At the time of the gift, Jerrys adjusted basis in the stock is $27,000 and the fair market value of the stock is $17,000. One month later when the stock is worth $16,500, Debbie trades the stock for bonds with a fair market value of $15,000 and $1,500 cash (i.e. Debbie received a total value of $16,500 on the exchange, $15,000 in bonds and $1,500 in cash).

A. What is Debbie's recognized gain or loss from the exchange?

1. ($10,500)
2. ($500)
3. $0
4. $16,500

B. What is Debbie's basis in the bonds?

1. $0
2. $15,000
3. $16,500
4. $17,000