Gail and Harry own the GH Partnership. They have conducted the business as a partnership for 10 years. The bases for their partnership interests are as follows.

Gail Harry

$100,000 ....... $150,000

GH Partnership holds the following assets.

*The straight-line method has been used to depreciate the building. Accumulated depreciation is $70,000.
Gail and Harry sell their partnership interests to Keith and Liz for $307,000 each.
a. Determine the tax consequences of the sale to Gail, Harry, and GH Partnership.
b. From a tax perspective, should it matter to Keith and Liz whether they purchase Gail and Harry's partnership interests or the partnership assets from GH Partnership? Explain.

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Basis FMV Asset Cash Accounts receivable Inventory Building Land 10,000 30,000 25,000 100,000 250,000 10,000 28,000 26,000 150,000 400,000