The ABC partnership distributes (in liquidation) $500 cash and 2 parcels of land (parcel 1 has a FMV of $2,000, and an inside basis $1,000, parcel 2 also has a FMV of $2,000, and an inside basis $1,000) to partner A whose outside basis is $3,500. What is the tax treatment to the partnership and to the partner of the distribution?