Franklin, Jefferson, and Washington formed the Independence Partnership (a calendar-year-end) by contributing cash 10 years ago. Each partner owns an equal interest in the partnership. Franklin, Jefferson, and Washington each have an outside basis in his partnership interest of $104,000. On January 1 of the current year, Franklin sells his partnership interest to Adams for a cash payment of $122,000. The partnership has the following assets and no liabilities as of the sale date:

............................................Tax Basis............Fair Market Value

Cash.......................................$ 18,000.........................$ 18,000

Accounts receivable........................-0-...........................12,000

Inventory...................................69,000...........................81,000

Equipment.............................180,000...........................225,000

Stock investment......................45,000.............................30,000

Totals.....................................$ 312,000........................$ 366,000

The equipment was purchased for $240,000 and the partnership has taken $60,000 of depreciation. The stock was purchased 7 years ago.

a. What is Franklin's overall gain or loss on the sale of his partnership interest?

b. What is the character of Franklin's gain or loss?