Example $6--$ Retirement of a Partner $($Sec$.736)$ Kim retires from the KLM Partnership on January $1$ of the current year. At that time, her basis in the partnership is $$75,000,$ which includes her share of liabilities. The partnership reports the following balance sheet: Assets Adj. Basis Market Value Cash $ $100,000$ $ $100,000$ Receivables $030,000$ Inventory $31,00040,000$ Land $55,000100,000$ Total Assets $$186,000$ $ $270,000$ Liabilities and Capital Liabilities $ $75,000$ $ $75,000$ Capital: Kim $37,00065,000$ Larry $37,00065,000$ Michael $37,00065,000$ Total Assets $$185,000$ $$270,000$ Explain the tax consequences of the partnership making the retirement payments described in the following independent situations. Kim$$s share of liabilities is $$25,000.$ a$.$ Kim receives $$65,000$ cash on January $1.$ b$.$ Kim receives $$75,000$ cash on January $1$