The December 31 balance sheet of GST Services, LLP reads as follows.

	Adjusted
	Basis	FMV
Cash	$300,000	$300,000
Receivables	0	150,000
Capital assets	120,000	150,000
Total	$420,000	$600,000
George, capital	$140,000	$200,000
Sue, capital	140,000	200,000
Tom, capital	140,000	200,000
Total	$420,000	$600,000

The partners share equally in partnership capital, income, gain, loss, deduction, and credit. Capital is not a material income-producing factor to the partnership, and all partners are active in the business. On December 31, general partner Sue receives a distribution of $200,000 cash in liquidation of her partnership interest under 736. Sue's outside basis for the partnership interest immediately before the distribution is $150,000. (Her basis does not correspond to her capital account because she purchased the interest a few years ago at a $10,000 premium and the partnership did not make a 754 election.) How much is Sue's gain or loss on the distribution and what is its character?

a. $40,000 capital gain; $10,000 ordinary income.

b. $40,000 ordinary income; $10,000 capital gain.

c. $50,000 ordinary income.

d. $50,000 ordinary income; $10,000 capital gain.