Required information [The following information applies to the questions displayed below.) Paolo is a 50 percent partner in the Capri Partnership and has decided to terminate his partnership interest. Paolo is considering two options as potential exit strategies. The first is to sell his partnership interest to the two remaining 25 percent partners, Giuseppe and Isabella, for $105,000 cash and the assumption of Paolo's share of Capri's liabilities. Under this option, Giuseppe and Isabella would each pay $52,500 for half of Paolo's interest. The second option is to have Capri liquidate Paolo's partnership interest with a proportionate distribution of the partnership assets. Paolo's basis in his partnership interest is $110,000, including Paolo's share of Capri's liabilities. Capri reports the following balance sheet as of the termination date: Tax Basis FMV Assets Cash Receivables Inventory Land an $ 80,000 40,000 50,000 50,000 $ 220,000 $ 80,000 40,000 80,000 60,000 $ 260,000 Totals Liabilities and capital Liabilities Capital-Paolo Capital-Giuseppe Capital-Isabella Totals $ 50,000 85,000 42,500 42,500 $ 220,000 a. If Paolo sells his partnership interest to Giuseppe and Isabella for $105,000, what are the amount and character of Paolo's recognized gain or loss? a. If Paolo sells his partnership interest to Giuseppe and Isabella for $105,000, what are the amount and character of Paolo's recognized gain or loss? $15,000 ordinary income and $5,000 capital gain $15,000 ordinary income and $15,000 capital gain $14,000 ordinary income and $5,000 capital loss $10,000 ordinary loss and $25,000 capital gain Neither gain nor loss recognized