Beth, who is married, is the sole shareholder of Pet Store Inc., a C corporation. She also manages the store. She wishes to expand the business, but the corporation needs additional capital for her to do so. Fortunately, she has saved $50,000 cash and plans to contribute it to the corporation. However, she does not know whether to contribute the cash in exchange for additional stock or lend the cash in exchange for a note.

Prepare a client memo that explains the tax consequences and requirements of each alternative so that Beth can make an informed decision.