The ELF Partnership distributed $20,000 cash to Emma in a proportionate, nonliquidating distribution. Emma's basis in her partnership interest was $12,000 immediately before the distribution. As a result of the distribution, Emma's basis is reduced to $0 and she recognizes an $8,000 gain.

Question

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In a nonliquidating distribution, if the cash distributed exceeds the partner's basis in the partnership, the partner's basis is reduced to zero, and the excess is recognized as a gain. Emma's basis was $12,000, and she received $20,000, resulting in an $8,000 gain.

The ELF Partnership Distributed $20,000 Cash to Emma in a Proportionate