A partnership has assets with a total FMV of $50,000 and basis to that partnership of $30,000.

There are four partners who each hold a 25% share whose basis is $5,000.

Partner Amy wants to liquidate her interest, and Partner Brett decides to buy her out for $12,500, which will bring his share up to 50%.

Soon after this transaction completes, the three partners decide to sell the partnership assets for $50,000 cash and distribute it according to their interests.

The partnerships elects a Section 754 adjustment.

Explain how to arrive at the correct adjustment for Amy, and whether or not she should recognize any ordinary income. Why or why not?