Salvador Owns a Passive Activity That Has a Basis of $44,000

Multiple Choice

Salvador owns a passive activity that has a basis of $44,000 and a suspended loss of $18,000. Salvador's taxable income from active and portfolio income is $55,000. If Salvador's sells the passive activity for $56,000 how will he report the transaction on his tax return?
I.Salvador will report an ordinary loss of $18,000.
II.Salvador will report a capital gain of $12,000.
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A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.