QUESTION 3 Donna, Susan and Patricia form a partnership. Donna contributes land with a fair market value of $25,000 (basis of $15,000) in exchange for a 25% interest. Susan contributes equipment with a $35,000 fair market value (basis of $38,000) in exchange for a 35% interest, and Patricia contributes a building with a $100,000 fair market value (basis = $35,000) and a mortgage of $60,000 (assumed by the partnership) in exchange for a 40% interest. How much gain does Patricia recognize?

$0

$1,000

$5,000

$65,000