Kathy is a 25 percent partner in the KDP Partnership and receives $120,000 cash in...
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Accounting
Kathy is a 25 percent 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?
Multiple Choice
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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