38. George and Martha are equal partners in G&M Partnership.

At the beginning of the current tax year, the adjusted basis of George’s partnership interest was $32,500, which included his share of $40,000 of partnership liabilities.

During the tax year, the following information applied to G&M:

Operating loss $30,000 Interest and dividend income $8,000 Partnership liabilities at end of year $24,000 What was the basis of George’s partnership interest at year end?

a. $13,500

b. $21,500

c. $29,500

d. $43,500