Choice "A" is correct. The $20,000 current distribution of cash is first applied to Jody's $50,000 basis, reducing it to $30,000. The current distribution of property is then applied at its $40,000 basis. Since Jody's remaining basis is $30,000, only $30,000 is applied to the property distribution, resulting in $0 taxable gain to Jody and $0 remaining basis in the partnership.
Choice "d" is incorrect. First, the cash distribution is fully applied, then the property distribution is applied at adjusted basis until the partner's basis is zero. No gain is generally recognized by the partner as a result of a current distribution unless the cash distributed is in excess of the partner's basis. In that case, the excess would be a gain to the partner (to avoid a negative basis).
Choice "b" is incorrect. The $10,000 gain is not recognized since the property distributed takes on a $30,000 basis to the partner.
Choice "c" is incorrect. First, the cash distribution is fully applied, then the property distribution is applied at adjusted basis until the partner's basis is zero. No gain is generally recognized by the partner as a result of a current distribution unless the cash distributed is in excess of the partner's basis. In that case, the excess would be a gain to the partner (to avoid a negative basis).