Kathy is a 25 percent partner in the KDP Partnership and receives $131,000 cash in complete liquidation of her partnership interest. Kathy's outside basis immediately before the distribution is $149,000. 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 $18,000 and Kathy will recognize a $18,000 loss on the distribution.

B.KDP will increase the basis of its assets by $18,000 and Kathy will recognize a $18,000 gain on the distribution.

C.KDP will decrease the basis of its assets by $18,000 and Kathy will recognize a $18,000 loss on the distribution.

D.KDP will decrease the basis of its assets by $18,000 and Kathy will recognize a $18,000 gain on the distribution.