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 $136,000), and Melissa contributes the assets of her sole proprietorship (fair market value of $140,000, adjusted basis of $115,000).

Complete the paragraphs below that outline the tax issues that should be considered by Mike, Melissa, and MM on the formation of the partnership. Also, the tax consequences of these issues.

Mike and Melissa recognize (a gain/ a loss/ no gain or loss) on contribution of their respective properties to the partnership. As a result, Mike has a basis of $___________ in his partnership interest and Melissa has a $_________ basis in her partnership interest. The partnership has a $___________ basis in the land contributed by Mike and $_________ basis in the assets contributes by Melissa.

The asset contributed by Mike has a built-in (gain/ loss) which must be tracked and allocated to (mike/ melissa/ both mike and melissa) if the property is ever sold at a (gain/ loss) . The asset contributed by Melissa has a built-in (gain/ loss) which must be tracked and allocated to (mike/ melissa/ both mike and melissa) if the property is ever sold at a (gain/ loss) .