Partner Oliver Received a Distribution of $60,000 Cash from the MNO

Multiple Choice

Partner Oliver received a distribution of $60,000 cash from the MNO Partnership in complete liquidation of his partnership interest.If Oliver's outside basis immediately before the distribution was $100,000, and if the partnership has a § 754 election in effect, which of the following statements is true? (Assume the partnership owns no "hot assets.")

A) Oliver will recognize a $40,000 capital loss on the distribution.
B) The partnership will step-up the basis of its assets by $40,000.
C) The partnership is not allowed a step-up adjustment in this situation.
D) The partnership will step-up the basis of its capital and § 1231 assets by $60,000.
E) None of the above.