Kathy is a $25$ percent partner in the KDP Partnership and receives $$120,000$ cash in complete liquidation of her partnership interest. Kathy's outside basis immediately before the distribution is $$160,000.$ 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 increase the basis of its assets by $$40,000$ and Kathy will recognize a $$40,000$ loss on the distribution.

B$)$ KDP will increase the basis of its assets by $$40,000$ and Kathy will recognize a $$40,000$ gain on the distribution.

C$)$ KDP will decrease the basis of its assets by $$40,000$ and Kathy will recognize a $$40,000$ loss on the distribution.

D$)$ KDP will decrease the basis of its assets by $$40,000$ and Kathy will recognize a $$40,000$ gain on the distribution.

Tone Loc and $89$ of his biggest fans formed an $S$ corporation, $2$hit, Incorporated, as the original $90$ shareholders. Tone then transferred some of his stock to his grandfather, four of Tone's cousins, five of Tone's children, three of Tone's grandchildren, and two close friends. According to the S corporation shareholder limit rules, how many shareholders does $2$ hit, Incorporated, have?

A$)90$

B$)92$

C$)95$

D$)97$

E$)$ None of the choices are correct.