Martha is a 50% partner in the AM Partnership and has an outside basis of $112,000 at the end of the year prior to any distributions. On December 31, Martha receives a proportionate operating distribution of $40,000 cash. What is the amount and character of Marthas recognized gain or loss and what is her basis in her partnership interest?

• $40,000 ordinary income, $72,000 basis.

• $0 gain, $72,000 basis.

• $0 gain, $112,000 basis.

• $40,000 ordinary income, $112,000 basis.