LO.6 Gail and Harry own the GH Partnership. They have conducted the business as a DE C I S ION MAKING 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 Harry’s partnership interests or the partnership assets from GH Partnership?