The gerund can function in several ways in a sentence, and the correct option would depend on the specific gerund in question. However, generally speaking:
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It describes the action of the subject. - This is typically not how a gerund functions; instead, this describes the role of a verb.
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It modifies a noun in the sentence. - This can be true; gerunds can act as adjectives when they modify nouns.
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It receives the action of the verb. - This is more characteristic of a direct object in the sentence, not specifically a gerund.
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It is the subject of the sentence. - This is a correct and common function of a gerund; gerunds can act as the subject of a sentence.
Therefore, the best response concerning how the gerund is functioning is: It is the subject of the sentence.