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ABC Corporation and Billy form a general partnership . ABC contributes a building with a fair market value of $ 1,000,000 and a tax basis of $100,000 . The partnership also assumes a recourse liability of $400,000 . ABC receives a 60 % interest in partnership capital and profits . Billy contributes inventory with a fair market value of $400,000 and a tax basis of $100,000 for a 40 % interest in partnership capital and profits .

What gain or loss must ABC and Billy recognize as a result of these transactions ?

A.

Neither partner recognizes any gain or loss.

B.

ABC recognizes $ 900,000 gain, Billy recognizes $300,000 gain

C.

ABC recognizes $60,000 gain , Billy recognizes no gain or loss.

D.

ABC recognizes $300,000 gain, Billy recognizes no gain or loss.