On July 1, Joseph, a 10% Owner, Sells His Interest

On July 1, Joseph, a 10% owner, sells his interest in ABC Partnership to Andy, an outsider, for $165,000 cash and the release from $20,000 of partnership liabilities. Joseph's partnership interest at the beginning of the year was $120,000. The partnership earned income through June 30 of $100,000. Joseph's share of partnership liabilities increased by $5,000 from January 1 to June 30. What are the tax consequences to Joseph on the sale of his partnership interest (assume the partnership does not hold any inventory or unrealized receivables) ?

A) $55,000 capital gain
B) $65,000 capital gain
C) $50,000 capital gain
D) $45,000 capital gain