Sarah Gave Her Granddaughter, Alice, Some Eli Lilly Co

Sarah gave her granddaughter, Alice, some Eli Lilly Co. stock last year when its fair market value was $25,000. Gift taxes of $4,000 were paid on this transfer. Sarah acquired the stock in 2004 at a cost of $35,000. Alice sold the Eli Lilly stock this year for $32,000. What amount of gain (loss) will Alice recognize from her sale of the stock?

A) No gain or loss is recognized.
B) $7,000
C) ($7,000)
D) ($3,000)