Question: Nancy is a 50% partner in the PM Partnership and has an outside basis of $112,000 at the end of the year prior to any

Nancy is a 50% partner in the PM Partnership and has an outside basis of $112,000 at the end of the year prior to any distributions. On December 31, Nancy receives a proportionate operating distribution of $42,000 cash. What is the amount and character of Nancy's recognized gain or loss and what is her basis in her partnership interest?'

A. $0 gain, $72,000 basis

B. $0 gain, $70,000 basis

C. $42,000 ordinary income,$112,000 basis

D. $40,000 ordinary income,$72,000 basis

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