You take your gnomish friend and cram him in a Bag of Holding. You then throw that same bag off a 120 foot cliff. The bag lands on dirt ground.
What happens to the bag, and the gnome?
This is up to a DM ruling, but it's possible that falling from such a great height, especially full of items (the bag always weighs 15 pounds, after all) could deal enough bludgeoning damage to the bag so that it ruptures. DMG 153 states,
If the bag is overloaded, pierced, or torn, it ruptures and is destroyed, and its contents are scattered in the Astral Plane.
Thus, your gnomish friend is now somewhere on the astral plane.
While I thought that the bag's opening is really a portal to some extradimensional space, it's actually just bigger (DMG 153):
This bag has an interior space considerably larger than its outside dimensions, roughly 2 feet in diameter at the mouth and 4 feet deep.
This passage, according to my reading, states that while the bag has extraplanar properties, the items inside the bag are still inside the bag, and not tucked away in some extraplanar space. It's just that magic makes the space bigger than it would normally be.
Thus, because being inside a bag doesn't protect you from fall damage , your gnome friend takes the 12d6 from falling.
Generally, this plan doesn't seem to result in the best outcomes for your gnome friend.
Compare this to the Portable Hole, which explicitly states that it opens to an extradimensional space (DMG 185-6):
The cylindrical space within the hole exists on a different plane...
Because that space is actually on a different plane, a creature hiding inside a portable hole would probably not take damage from the fall (unless the item was damaged in the fall somehow).
Nothing happens to the gnome as long as the bag survives the fall.
According to the DMG, as further explained by Jeremy Crawford in a Sept. 17, 2015 twitter exchange, the inside of a bag of holding is an extradimensional space. When the bag ruptures, the insides spill into the Astral Plane, which imply that the "outside" for those inside the bag is not Prime Material Plane any longer.
A GM (who sees the described use of the bag as harmful to game balance) might arguably judge that the outside shape of the bag somehow effect the "walls" of the extradimensional space, but there is no written rule to imply such an interpretation. So, under the assumption that the bag survives the fall (ie. does not get pierced or torn), any object inside of it should be safe.