Mike and Melissa form the equal MM Partnership. Mike contributes cash of $40,000 and land (fair market value of $100,000, adjusted basis of $120,000), and Melissa contributes the assets of her sole proprietorship (value of $140,000, adjusted basis of $115,000). What are the tax consequences of the partnership formation to Mike, Melissa, and MM Partnership? Assume the same facts as in this problem, except that Mike sells his land to a third party for $100,000 and then contributes that cash to the partnership. The partnership locates equivalent land that it purchases for $110,000. How do these changes affect the tax result for Mike and the partnership? How does the economic result differ? Solution Melissa has a taxable transaction when she sells the assets to a third party. -She receives cash of $115,000 in exchange for assets with a basis of $140,000 and recognizes a $25,000 loss. (Based on the facts presented, the loss will likely be a .