On December 31, Year 1, Freds interest in Partnership C had an adjusted basis of $20,000, which included his $25,000 share of partnership liabilities for which neither Fred, the other partners, nor the partnership had assumed any personal liability. C had no other liabilities, no unrealized receivables, or substantially appreciated inventory items. On January 2, Year 2, Fred withdrew from the partnership and was relieved of his share of the partnerships liabilities. What are the amount and the character of Freds gain or (loss)?

a. $5,000 ordinary gain.

b. $0

c. $5,000 capital gain.

d. $(20,000) capital loss.