The WXYZ Partnership has four partners, with each having a 25% interest in the partnership. The partners share all losses equally, but in accordance with a special allocation, the partnership agreement allocates all gains and profits to Partners 1, 2, and 3, but none to Partner 4. The partnership has two assets. Asset 1 has a built-in gain of $3.2 million, and Asset 2 as built-in loss of $3.2 million. If a new partner purchases Partner 4's partnership interest, will a mandatory basis adjustment apply to the new partner? .... Identify the gain or loss that would be allocated to the new partner. (Complete all input fields. Enter any currency amounts in dollars, not millions. Enter a $0 if no gain or loss is allocated. Enter a loss with a minus sign or parentheses.) Gain (loss) allocated to the new partner If a new partner purchases Partner 4's partnership interest, will a mandatory basis adjustment apply to the new partner? O A. No. There since there is zero gain or loss allocated to the new partner, there will be not mandatory basis adjustment. OB. Yes. Even though the partnership's total basis in assets does not exceed their FMV by more than $250,000, the new partner would be allocated a loss in excess of that amount if the partnership were to sell its assets. This allocated loss exceeds $250,000, so a substantial built-in loss exists, which in turn makes a mandatory downward basis adjustment necessary. OC. Yes. Even though the partnership's total basis in assets does not exceed their FMV by more than $250,000, the new partner would be allocated a gain in excess of that amount if the partnership were to sell its assets. This allocated gain exceeds $250,000, so a substantial built-in gain exists, which in turn makes a mandatory upward basis adjustment necessary. OD. No. Even though the partnership's total basis in assets does not exceed their FMV by more than $1,000,000, the new partner will be allocated a loss in excess of that amount if the partnership were to sell its assets. This allocated loss exceeds $1,000,000, so a substantial built-in loss exists, which in turns makes a mandatory downward basis adjustment necessary