If a partnership has liabilities of $3,000,0000 which at the beginning of the year were appropriately allocated equally to A and B ( the only partners). This is the only liability of the partnership. Based on renegotiations of partner legal responsibilities for the debt, at year end the liability will be appropriately allocated only to A.
a) A's basis will increase by $1,500,000
b) B will be considered to have received a cash distribution of $1,500,000 which reduces the adjusted basis in B's partnership interest.
c) If B's adjusted basis is less than $1,500,000, B will recognize income for the excess of $1,500,000 over the adjusted basis.
d) All of the above
e) None of the above.