LO.6 Gail and Harry own the GH Partnership, which has conducted business for 10 years. The bases for their partnership interests are $100,000 for Gail and $150,000 for Harry. GH Partnership has 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, would it matter to Keith and Liz whether they purchase Gail’s and Harry’s partnership interests or the partnership assets from GH Partnership?