Patrick acquired a 50% interest in a partnership by contributing property that had an adjusted basis of $8,000 and a fair market value of $29,000. The property was subject to a liability of $22,000, which the partnership assumed for legitimate business purposes. Which of the following statements is correct?
A) Patrick will be required to recognize a $3,000 gain due to the negative basis rules and will have a basis in his partnership interest of zero.
B) Patrick will not be required to recognize a gain on his return and will have a basis in his partnership interest of negative $3,000.
C) Patrick will be required to recognize a $21,000 gain due to the negative basis rules and will have a basis in his partnership interest of zero.
D) Patrick will be required to recognize a $14,000 gain due to the negative basis rules and will have a basis in his partnership interest of zero.
A) Patrick will be required to recognize a $3,000 gain due to the negative basis rules and will have a basis in his partnership interest of zero.
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