In an exchange, Paolo gave up his business-use real property (FMV $115,000, adjusted basis $75,000) for a smaller piece of business-use real property (FMV $95,000) and $20,000 cash. What is the gain realized and recognized on the exchange? ______ realized gain; _____ recognized gain.

$20,000; $0.

$40,000; $0.

$40,000; $20,000.

$40,000; $40,000.