Let's now apply these concepts to Sunchaser Shakery. Nicholas has an interest in Sunchaser Shakery Partnership, which has a $15,000 outside basis. He receives an operating distribution of $6,000 cash. In part A, it says, "Determine the tax treatment of the distribution for both Nicholas and Sunchaser." So, recall that the rules here, that there is no gain or loss to the partnership, and no gain or loss to the partner, unless the money distributed exceeds the outside basis. So, in part A, he's receiving a $6,000 distribution of cash which is less than his $15,000 outside basis. As a result, there's no gain or loss for him to recognize. And his outside basis is now $9,000, his $15,000 initial basis minus the distribution of $6,000. In part B, it says, "Determine the tax treatment of the distribution for both Nicholas and Sunchaser if the cash distribution was $20,000." So, now with greater amounts of cash coming out to him, we see that the money distributed of $20,000 now does exceed his outside basis of $15,000, and the amount of this excess is $5,000. As a result, he's going to recognize a $5,000 gain. The character of this game is capital, his basis is now zero because of the distribution. And for the partnership, Sunchaser, as the rules imply, pretty straightforward, there is no gain or loss. And that's all there is to it.