Reilly Diefenbach is a 30 percent partner in a partnership and has a basis in his partnership interest of $20,000. Assume that the partnership has a Sec. 754 election in effect, and that Reilly receives a cash distribution of $35,000 from the partnership. Which of the following statements is true?

a) The partnership will step up the basis of its assets by $15,000.

b) The partnership will step down the basis of its assets by $15,000.

c) Reilly will recognize

d) The partnership will not adjust the basis of its assets.