2. Kathy is a 25% partner in the KDP Partnership and receives $137,000 cash in complete liquidation of her partnership interest. Kathy's outside basis immediately before the distribution is $143,000. 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 step up the basis of its assets by $6,000 and Kathy will recognize a $6,000 loss on the distribution.

b.KDP will step up the basis of its assets by $6,000 and Kathy will recognize a $6,000 gain on the distribution.

c.KDP will step down the basis of its assets by $6,000 and Kathy will recognize a $6,000 loss on the distribution.

d.KDP will step down the basis of its assets by $6,000 and Kathy will recognize a $6,000 gain on the distribution.