Aaron Owns a 30% Interest in a Continuing Partnership

Multiple Choice

Aaron owns a 30% interest in a continuing partnership. The partnership distributes a $35,000 year-end cash bonus to all the partners. In a proportionate nonliquidating distribution, the partnership also distributed property (basis of $15,000; fair market value of $20,000) to Aaron. Immediately before the distribution, Aaron's basis in the partnership interest was $50,000. As a result of the distribution, Aaron recognizes:

A) No gain or loss.
B) Ordinary loss of $5,000.
C) Capital loss of $5,000.
D) Ordinary gain of $5,000.
E) Capital gain of $5,000.