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

question 37

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

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Definitions:

Cervical

Relating to the cervix of the uterus or relating to the neck region of the body.

Vertebral Column

The backbone or spine, consisting of a series of vertebrae that extend from the skull to the tailbone, providing structural support and protection for the spinal cord.

Jugular Foramen

A large opening in the skull that allows passage of the jugular vein and several nerves, located between the temporal and occipital bones.

Skull Canal

An anatomical passage or opening in the skull bone through which nerves or vessels pass.