Question - Sam receives a proportionate nonliquidating distribution when the basis of his partnership interest is $40,000. He received a cash distribution of $25,000 and a property distribution (basis of $10,000 and fair market value of $12,000). In addition, Sam's share of partnership liabilities was reduced by $20,000 during the year. How much gain or loss does Sam recognize; what is his basis in the property he received; and what is his remaining basis in the partnership interest?
a. $0 gain or loss; $10,000 basis in property; $5,000 remaining basis.
b. $0 gain or loss; $12,000 basis in property; $3,000 remaining basis.
c. $5,000 gain; $0 basis in property; $0 remaining basis.
d. $5,000 gain; $0 basis in property; $5,000 remaining basis.
e. $17,000 gain; $12,000 basis in property; $0 remaining basis.