John and Yi formed the X partnership on June 16, 20X6. They agreed to split profits and losses equally. John contributed $20,000 cash and Yi contributed a machine with a basis of $5,000 (fmv $50,000) subject to a mortgage of $30,000 on June 17, 20X6. Yis holding period for the machine began on May 2, 20X4.

The X partnerships net recognized gain or loss is:

a. $15,000

b. $45,000

c. $0

d. None of the above