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.

Asset Basis FMV

Cash $ 10,000 $ 10,000

Accounts receivable 30,000 28,000

Inventory 25,000 26,000

Building* 100,000 150,000

Land 250,000 400,000

* 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 Harrys partnership interests or the partnership assets from GH Partner- ship? Explain.