Kim retires from the KLM Partnership on January 1 of the current year. At that time, her basis in the partnership is $75,000, which includes her share of liabilities. The partnership reports the following balance sheet:

Explain the tax consequences (i.e., amount and character of gain or loss recognized and Kim€™s basis for any assets received) of the partnership making the retirement payments described in the following independent situations. Kim€™s share of liabilities is $25,000.
a. Kim receives $65,000 cash on January 1.
b. Kim receives $75,000 cash on January 1.

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Partnership's Basis FMV Assets Cash S100,000 S100,000 Receivables 30,000 30,000 Inventory 40,000 40,000 Land 55,000 100.000 Total $270,000 Liabilities and capital Liabilities S 75,000 S75,000 Capital- Kim 50,000 65,000 -Larry 50,000 65,000 -Michael 50,000 65.000 Total $225,000 S270,000