Diane has a 40% general partnership interest in the DEF Partnership. Her tax basis in the partnership interest is $12,000, which includes $40,000 of nonrecourse liabilities, her share of the $100,000 partnership nonrecourse debt. Diane receives a distribution of an unimproved parcel of land with a fair market value of $20,000 that is encumbered by nonrecourse liabilities of $10,000. The distribution reduces her interest from 40% to 20%. After the distribution, the partnership has liabilities of $90,000 of which her share is $18,000. Which of the following statements is correct? Select one:

a. The $22,000 reduction in her share of partnership liabilities causes $10,000 of gain.

b. Diane will recognize $8,000 of gain, the excess of the fair market value of the land over her adjusted basis.

c. The reduction in liabilities is netted with the liabilities assumed resulting in a $12,000 cash distribution.

d. Dianes basis in the land is $10,000.