Hi again Paula;
There is nothing underlined. Because a gerund must end in -ing, I assume the word at issue is walking.
This must be...
By definition, a gerund is a verb acting as a noun. The word walking is typically a verb. However, in this sentence, it is the subject of the sentence.
As to the other answers...
A. predicate nominative
There is no linking verb such as be, am, are, is, was, etc. Henceforth, there is no predicate nominative.
C. object of a preposition
There is no preposition such as of, in, on, for, etc.
D. direct object
Walking is not the recipient of any action in this sentence.