Choice "C" is correct. General rules:

1. A nonliquidating distribution to a partner is nontaxable.

2. In nonliquidating distribution to a partner, the basis of property received will be the same as the basis in the hands of the partnership immediately prior to the nonliquidating distribution.

3. Distributions to a partner reduce the partner's basis by the cash the partner receives and by the partnership's adjusted basis in property which the partner receives.

Exception to the general rule (the exception does not apply to the facts set forth in the question): Gain is recognized only to the extent that cash (including the partner's share of partnership liabilities are assumed by other partners) distributed exceeds the adjusted basis of the partner's interest in the partnership immediately before the distribution.In this question, the partner received no cash, and the partner's share of partnership liabilities did not change. So, the partner will recognize no gain with respect to the distribution. Although the partnership's adjusted basis in the distributed property was $20,000, because the partner's basis in the partner's partnership interest was only $10,000, the adjusted basis of the property which the partner received will be limited to $10,000. The new basis in the partnership interest will be reduced from $10,000 to -0-.Choices "d", "a", and "b" are incorrect per the above rules.