Ross Lives in a House He Received as a Gift

Multiple Choice

Ross lives in a house he received as a gift from his father. His father had lived in the house for 12 years. The adjusted basis of the house to his father was $160,000 and the fair market value at the time of the gift was $140,000. Ross sells this residence after living in it for 18 months for $150,000 and purchases a new home for $125,000. He incurs selling expenses of $7,000. What is Ross' recognized gain or loss and basis for the new residence?

A) ($17,000) ? $125,000.
B) ($17,000) ? $142,000.
C) $3,000? $125,000.
D) $3,000? $128,000.
E) None of the above.