On July 1, 2014, Ambrose Was Admitted to Partnership in the Firm

On July 1, 2014, Ambrose was admitted to partnership in the firm of Ambrose and Nectar. His contribution to capital consisted of 500 shares of stock in Paniculata Corporation, which he bought in 1990 for $10,000 and which had a fair market value of $50,000 on July 1, 2014. Ambrose's interest in the partnership's capital and profits is 25 percent. On July 1, 2014, the fair market value of the partnership's net assets (after Ambrose was admitted) was $200,000. What is Ambrose's taxable gain in 2014 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 the above