Carrie and Bob form a partnership. Carrie contributes equipment worth $40,000 with an adjusted basis of $30,000 and $10,000 in cash. Bob contributes a building with a fair market value of $100,000 and an adjusted basis of $45,000. The property is subject to a liability of $60,000. The following is a tax consequence of the formation of the partnership if the partner's ownership interests are proportionate to their contributions:

Neither Carrie nor Bob recognizes any gain.

Carrie recognizes $0 gain and Bob recognizes $40,000 of gain.

Carrie recognizes $10,000 of gain and Bob recognizes $0.

Carrie recognizes $0 gain and Bob recognizes $5,000 of gain.