Question: Lucy has an outside tax basis in her partnership interest at the end of year one of $35,000 which includes her share of partnership liabilities

Lucy has an outside tax basis in her partnership interest at the end of year one of $35,000 which includes her share of partnership liabilities of $6,000. In year two the partnership allocates Lucy the following items: ordinary income of $4,300, non-deductible expenses of $1,200, cash distributions of $8,200 and end of year non-recourse liabilities of $3,000. Lucy's outside basis in her partnership interest at the end of year two is:

A. $28,100

B. $32,900

C. $29,300

D. $26,900

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