From GailInventory (basis)60,000,FMV 50,000Equipment(basis)125,000,FMV250,000Patentable invention(Basis)15,000,FMV300,000, exchange for 60 shares of stock of Owl's corporation. Gail is considering an alternative to the plan as presented above. She is considering selling the inventory to an unrelated third party for $50,000 in the current year instead of contributing it to Owl. After the sale, she will transfer the $50,000 sales proceeds along with the equipment and patentable invention to Owl for 60 shares of Owl stock. Whether or not she pursues the alternative, she plans to sell her Owl stock in six years for an anticipated sales price of $700,000. In present value terms and assuming she later sells her Owl stock, determine the tax cost of (1) contributing the property as originally planned, or (2) pursuing the alternative she has identified.

Assume a discount rate of 6%. The present value factors at 6% are 1.000 for year 1 and 0.7050 for year 5. Further, assume Gail's marginal income tax rate is 28% and her capital gains rate is 15%.

Question: what is Tax cost associated with the current sale of inventory for $50,000 and subsequent sale of Owl stock for $700,000 .what is the present value of the tax cost of the alternative?