The sentence <em>The man in the gray suit tipped his hat</em> contains a b) prepositional phrase used as an adjective.
Explanation:
A <u>prepositional phrase</u> is a group of words made up of a preposition and its object that may include any other word that modifies the object. <u>Prepositional phrases</u> can function as a noun, as an adverb or as an adjective, like in this case. The <u>prepositional phrase</u> <em>in the gray suit</em>, introduced by the preposition <em>in</em>, is functioning as a adjective, since it is modifying the noun <em>man</em>.