The December 31, 2016, Balance Sheet of the RST General

The December 31, 2016, balance sheet of the RST General Partnership reads as follows. $\begin{array}{lrr}&\text { Adjusted } \\&\text { Basis }&\text { FMV }\\\text { Cash } & \$ 65,000 & \$ 65,000 \\\text { Receivables } & -0- & 7,500 \\\text { Capital and } \S 1231 \text { assets } & 55,000 & 100,000 \\\text { Total } & \mathbf{\$ 1 2 0 , 0 0 0} & \mathbf{\$ 1 7 2 , 5 0 0}\\\\\text { Roy, capital } & \$ 40,000 & \$ 57,500 \\\text { Sue, capital } & 40,000 & 57,500 \\\text { Ted, capital } & 40,000 & 57,500 \\\text { Total } & \mathbf{\$ 1 2 0 , 0 0 0} & \mathbf{\$ 1 2 7 , 5 0 0} \\\end{array}$
The partners share equally in partnership capital, income, gain, loss, deduction and credit. Ted's adjusted basis for his partnership interest is $40,000. On December 31, 2016, he retires from the partnership, receiving a $60,000 cash payment in liquidation of his interest. The partnership agreement states that $2,500 of the payment is for goodwill. Which of the following statements about this distribution is false?

A) If capital is NOT a material income-producing factor to the partnership, the § 736(a) payment will be $2,500.
B) If capital IS a material income-producing factor, the entire $60,000 payment will be a § 736(b) property payment.
C) The payment for Ted's share of goodwill will create $2,500 of ordinary income to him.
D) The partnership can deduct any amount that is a § 736(a) payment because it will be determined without regard to partnership profits.
E) All statements are false.