Sandra owned an equipment rental business in her sole name for four years. In January of 2013, Sandra transferred the equipment to ABC Rental Corporation, a newly formed corporation. Sandra received all of the stock of ABC Rental Corporation in exchange for the equipment. At the time of the transfer of the equipment to ABC Rental Corporation, Sandra's adjusted basis in the equipment was $50,000, the fair market value of the equipment was $150,000, the equipment was subject to a security agreement and note assumed by the corporation in the amount of $70,000, and there was depreciation recapture potential of $12,000. Sandra received stock of ABC Rental Corporation worth $80,000.
How much gain did Sandra recognize as a result of the transaction, and what was the character of the gain?
a. Sandra recognized $12,000 of gain, all of which was ordinary income.
b. Sandra recognized $20,000 of gain, at least $12,000 of which was ordinary income.
c. Sandra recognized $30,000 of gain, at least $12,000 of which was ordinary income.
d. Sandra recognized $100,000 of gain, all of which was ordinary income.