Henry receives his 20% partnership interest as a gift from a friend. The friend's basis (without considering partnership liabilities) is $34,000. The FMV of the interest at the time of the gift is $36,000. The partnership has liabilities of $100,000 when Henry receives his interest. No gift tax was paid with respect to the transfer.

• Answer: Henry receives his 20% partnership interest as a gift from a friend. (Sec.704)

Adjusted Basis of Contributed Gift $34,000
Henry's Share of Income (34,000 X 0.20) + $6,800
= $40,800
Henry Deemed Distribution from Repayment of Partnership Liability
(100,000 X 0.20)
-$20,000
Henry's Recognized Liability $14,000

why would his recognized liability be $14,000... When the math makes it look like it should be $20,800.... what am I doing wrong or what other variable do I need to know about?