For a$30\%$ interest in partnership$$ capital, profits, and$$ losses, Carol contributes a machine with a basis of$$ $$40,000$ and an FMV of$$ $$80,000.$ The partnership assumes a$$ $$70,000$ recourse liability on the machine. At the time of the$$ contribution, the partnership had recourse liabilities of$$ $$10,000.$ Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses. Following the$$ contribution, Carol has

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Part $1$

A$.$

a$$ $$34,000$ basis in the partnership interest and no gain or loss.

B$.$

a capital loss due to the contribution of$$ $$6,000$ and a zero basis in the partnership interest.

C$.$

a capital gain due to the contribution of$$ $$6,000$ and a zero basis in the partnership interest.

D$.$

a$$ $$43,000$ basis in the partnership interest and no gain or loss.