On July 1 of the Current Year, Ambrose Was Admitted

On July 1 of the current year, Ambrose was admitted to the partnership of Ambrose and Nectar. His contribution to capital consisted of 500 shares of stock in Paniculata Corporation, which he bought in 2015 for $10,000 and which had a fair market value of $50,000 on July 1 of the current year. Ambrose's interest in the partnership's capital and profits is 25 percent. On July 1 of the current year, the fair market value of the partnership's net assets (after Ambrose was admitted) was $200,000. What is Ambrose's taxable gain in the current year on the exchange of stock for his partnership interest?

A) $0 gain or loss
B) $40,000 ordinary income
C) $40,000 long-term capital gain
D) $40,000 Section 1231 gain
E) None of these