Gifting stock that has a loss on original basis?

If that's your only gift to this person all year, correct.

No, you cannot give away a loss.

Since the FMV on date of gift is less than your own cost basis, the recipient's cost basis is determined when he sells it.

He uses FMV on date of gift to determine loss, and uses the donor's basis to determine gain.

It is possible there could be neither gain nor loss using this procedure.

So using my example ($16 cost, $14 fmv at transfer) if the recipient sells at $15 there $0 capital gain/loss, but at $20 there is $4 capital gain. Is that right?

So I am really better off selling at a loss and giving cash.

So is it usually more tax-advantageous to sell the stock so you can realize the loss yourself, give the cash, and let them buy back the stock? If you bought it back yourself it would be a wash sale, but I don't imagine the IRS would consider this a sham to get around the wash sale rule (there's nothing forcing the gift recipient to buy the same stock).

Yes.

If that's your goal, yes.

Where this becomes an issue is where you are carrying a humongous capital loss carryover and cannot see an advantage for taking more loss.

Yes; see my reply to OP.

But if you've already built up a humongous capital loss, taking even more loss may not help much.

The way it works, if the recipient sells it he cannot use any built in loss. His basis for loss is FMV on date of gift.

The IRS has held the related party rule to apply to wash sales so the purchase of the same stock by a close related party could deny the original loss on the sale. While "there's nothing forcing the gift recipient to buy the same stock" may be true, it's the purchase by a close relative, not the reason for the purchase that is determinative.