At the end of last year, Cindy, a 20% partner in the fiveperson CBT partnership, has an outside basis of $25,000 including her $10,500 share of CBT debt. On January 1 of the current year, Cindy sells her partnership interest to Raymond for a cash payment of $18,000 and the assumption of her share of CBT's debt. CBT has no hot assets. What is the amount and character of Cindy's recognized gain or loss on the sale?

$7,000 capital loss.

$7,000 ordinary loss.

$3,500 capital gain.

$7,500 ordinary income.