Molly, a 30% partner in XYZ partnership, has a basis of $55,000 in her partnership interest. She receives a cash distribution of $54,000 at year-end. The deviens fax what tax effect on Molly?
She has a recognized gain of $37,500 and a basis of $0 in her partnership interest.
She has a recognized gain of $55,000 and a basis of $0 in her partnership interest
No gain or loss is recognized, and she has a $1,000 basis in her partnership interest.
No gain or loss is recognized, and she has a $55,000 basis in her partnership interest.