If a gift was purchased with stolen money, must the person who received the gift return it? What is the law on such things?

if this is a police matter the item may be confiscated for evidence in the crime

it is a crime to receive stolen goods, so you are as much at fault as the perpetrator when you accept the gift knowing the source was stolen

Not in most states. I'm not too familiar with this but my understanding is that unless it's something like a car or something worth a large amount of money you're not responsible for the theft.

The law varies from jurisdiction to jurisdiction

No, the person who stole the money is responsible for paying it back.

yes