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.

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