Choice "B" is correct. Hart must reduce his $9,000 original basis by the $5,000 cash distribution to a basis of $4,000. Smith's basis in the land is the lesser of the land's basis in the partnership's hands ($7,000) or Hart's remaining basis in his partnership interest in Best ($4,000 after the cash distribution).
Choice "a" is incorrect. Hart's basis in the land is greater than zero. Hart's basis must first be reduced by the cash received.Choice "c" is incorrect. Hart's basis in the land can not be greater than his remaining basis in his partnership interest after deducting the cash received.
Choice "d" is incorrect. The fair market value of the land is not considered in determining Hart's basis in the land.