C is wrong

Kathy is a 25% partner in the KDP Partnership and receives $130,000 cash in complete liquidation of her partnership interest. Kathy's outside basis immediately before the distribution is $150,000. KDP currently has a sectionsign 754 election in effect and has no hot assets or liabilities. Which of the following statements is true? KDP will step down the basis of its assets by $20,000 and Kathy will recognize a $20,000 loss on the distribution. KDP will step up the basis of its assets by $20,000 and Kathy will recognize a $20,000 gain on the distribution. KDP will step down the basis of its assets by $20,000 and Kathy will recognize a $20,000 gain on the distribution. KDP will step up the basis of its assets by $20,000 and Kathy will recognize a $20,000 loss on the distribution