36. Franklin, Jefferson, and Washington formed the Independence Partnership (a calendar year-end entity) by contributing cash 10 years ago. Each partner owns an equal interest in the partnership and has 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 FMV 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 Tax Basis FMV 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 seven 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?