Richard Jacobson and Lawrence Larson (plaintiffs) were general partners of Jacobson Warehouse Company (JWC), which owned the McDonald properties. JWC attempted to sell the McDonald properties for two years before it formed a partnership with Metropolitan Life Insurance Company (Metropolitan) (the partnership). In 1982 JWC contributed the McDonald properties to the partnership, and Metropolitan contributed $6 million in cash. Because the McDonald properties had a value of approximately $8 million, Metropolitan’s cash contribution equaled 75 percent of JWC’s contribution. Metropolitan’s cash contribution was immediately disbursed to JWC. After these transactions and in accordance with the partnership agreement, Metropolitan owned 75 percent of the partnership, while JWC received cash for 75 percent of the value of the McDonald properties and owned 25 percent of the partnership. Jacobsen and Larson did not include their transfer of the McDonald properties to the partnership on their income-tax return, arguing the transfer was a nontaxable capital contribution under § 721 of the Internal Revenue Code. The Commissioner of Internal Revenue (the Commissioner) (defendant) assessed a deficiency against Jacobson and Larson, arguing 25 percent of the transfer of the McDonald properties was a nontaxable capital contribution in exchange for a 25 percent partnership share, with the remaining 75 percent a taxable sale. Jacobson and Larson petitioned the United States Tax Court for a redetermination.