Kathy Purchases a One-Third Interest in the KDP Partnership from Paul

question 5

Multiple Choice

Kathy purchases a one-third interest in the KDP Partnership from Paul for $60,000. Just prior to the sale, Paul's outside and inside bases in KDP are $48,000. KDP's balance sheet includes the following:

If KDP has a §754 election in place, what is Kathy's special basis adjustment?

• A) $0.
• B) $36,000.
• C) $12,000.
• D) None of the choices are correct.

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