should is your choice. but the following rules apply.. if your tax basis is greater you get no tax deduction for the loss. if FMV is greater and over $16,000 you have to file a gift tax return.
as to his situation
the tax basis of the shall be the same as it would be in the hands of the donor (you) except that if such basis is greater than the fair market value of the property at the time of the gift, then for the purpose of determining loss the basis shall be such fair market value.
