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

Kathy is a 25percent partner in the KDP Partnership and receives $129,000 cash in complete liquidation of her partnership interest. Kathy's outside basis immediately before the distribution is $151,000. 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 $22,000 and Kathy will recognize a $22,000 loss on the distribution.
B) KDP will increase the basis of its assets by $22,000 and Kathy will recognize a $22,000 gain on the distribution.
C) KDP will decrease the basis of its assets by $22,000 and Kathy will recognize a $22,000 loss on the distribution.
D) KDP will decrease the basis of its assets by $22,000 and Kathy will recognize a $22,000 gain on the distribution.
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
84) Joan is a one-third partner in the PDJ Partnership. PDJ Partnership uses the proration method to allocate income and losses to partners with varying interests. On May 1, Joan sells her interest to Freddie for a cash payment of $75,000. On January 1, Joan's basis in PDJ is $57,000. PDJ generates $60,000 of ordinary income and $9,000 of tax-exempt income during the first four months of the year. PDJ has the following assets and no liabilities at the sale date:
What is the amount and character of Joan's gain or loss on the sale?