In 2002, Carol and Alice formed C&A partnership by contributing cash.Note: neither of them contributed property using Sec. 721.They share profits and losses equally.

At the end of 2020, Carol's outside basis in her partnership is $160,000.At that time, the partnership distributes an asset to Carol with a fair market value of $80,000 and an adjusted basis of $20,000 (inside basis). Carol is in the 37% tax bracket and does not have any capital gain or losses during the year nor does she have capital loss carryforwards.

a. Does Carol recognize a gain on loss on this distribution?

b. What is Carol's outside basis following the distribution?

c. What are the tax consequences to C&A partnership from this distribution?