Randi owns a 40% interest in the capital and profits of the RAY Partnership. Immediately before she receives a proportionate nonliquidating distribution from RAY, the basis for her partnership interest is $60,000 . The distribution consists of $45,000 in cash and land with a fair market value of $72,000 . RAY's adjusted basis in the land immediately before the distribution is $36,000 . As a

result of the distribution, Randi recognizes a gain of $21,000.
a. True
b. False
Indicate whether the statement is true or false

False
RATIONALE: Under § 731(a), gain is recognized by a distributee partner in a nonliquidating distribution only if the cash received (including marketable securities or liability relief treated as cash) exceeds the basis of the partner's interest. Because Randi received cash of $45,000 (compared to her basis of $60,000), no gain results. Randi's basis in the land is limited to $15,000, and her interest basis is reduced to zero.