The Dominguez Partnership Has the Following Assets on December 31

Multiple Choice

The Dominguez Partnership has the following assets on December 31: $\begin{array}{lrr}&\underline{\text { Basis }}&\underline{\text { Fair Market Value }}\\\text { Cash } & \$ 10,000 & \$ 10,000 \\\text { Receivables } & 5,000 & 10,000 \\\text { Inventory } & 20,000 & 30,000\end{array}$
Antonio is a 20 percent partner and has a $7,000 basis in his partnership interest.The partnership has no liabilities.Antonio receives a liquidating distribution of $10,000 cash.What is the amount and character of the gain or income Antonio recognizes on this liquidating distribution?

A) 0
B) $1,000
C) $2,000
D) $3,000