Choice "C" is correct. As a general rule, a partner who sells or exchanges his or her partnership interest has a recognized capital gain or loss. The capital gain or loss is measured by the difference between the amount realized for the sale and the adjusted basis of the partnership interest. An exception to the capital gain treatment is on any gain that represents a partner's share of "hot assets". Any gain that represents a partner's share of hot assets is treated as ordinary income. Hot assets are: (1) Unrealized receivables and, (2) Appreciated inventory.Choice "d" is incorrect. Cash is not a hot asset.Choice "b" is incorrect. Section 1231 assets are not hot assets.Choice "a" is incorrect. Capital assets are not hot assets.