Kathy Is a 25% Partner in the KDP Partnership and Receives

question 100

Multiple Choice

Kathy is a 25% partner in the KDP Partnership and receives $120,000 cash in complete liquidation of her partnership interest. Kathy's outside basis immediately before the distribution is $160,000. KDP currently has a §754 election in effect and has no hot assets or liabilities. Which of the following statements is True?

• A) KDP will increase the basis of its assets by $40,000 and Kathy will recognize a $40,000 loss on the distribution.
• B) KDP will increase the basis of its assets by $40,000 and Kathy will recognize a $40,000 gain on the distribution.
• C) KDP will decrease the basis of its assets by $40,000 and Kathy will recognize a $40,000 loss on the distribution.
• D) KDP will decrease the basis of its assets by $40,000 and Kathy will recognize a $40,000 gain on the distribution.

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Definitions:

Type B Behavior Pattern

A personality type characterized by a less competitive, less aggressive, and more relaxed approach to life, in contrast to Type A behavior.

B Lymphocytes

A type of white blood cell of the lymphocyte subtype, which plays a significant role in the body's immune defense against bacteria, viruses, and other pathogens.

Natural Killer Cell

A type of white blood cell that plays a critical role in the body's immune response by targeting and destroying infected cells and cancer cells.

Cardiomyocyte

A type of muscle cell found in the heart that is responsible for cardiac contraction.