Paul Sanders, a married taxpayer who files a joint return with his wife, acquired stock in a corporation that qualified as a small business corporation under § 1244. The stock cost $30,000 and was acquired three years ago. A few months after he acquired the stock, he gave it to his brother, Mike Sanders. The stock was worth $30,000 on the date of the gift. Mike, who is married and files a joint return with his wife, sells the stock for $10,000 in the current tax year. You represent Mike, who asks you whether he can take a loss deduction on the sale of the stock. If so, how will the loss be treated for tax purposes? Prepare a letter to your client and a memo for the files. Mike’s address is 2600 Riverview Drive, Cape Girardeau, MO 63701.