Anna Owns a Passive Activity That Has a Basis of $30,000

Multiple Choice

Anna owns a passive activity that has a basis of $30,000 and a suspended loss of $7,000. Anna gifts the passive activity to her daughter Patricia when the property has a fair market value of $42,000.
I.Anna will report an ordinary loss of $7,000.
II.Patricia's basis in the passive activity is $30,000.
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A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.