Jack and John exchange inventory and machinery with a combined basis of $100,000 and a fair market value of $500,000 to ABC corporation in return for 100% of its stock. Prior to a 351 transaction, Jack and Jill agreed that Jack would sell Jill his 50% interest in ABC corporation within one week of obtaining the shares. How much gain or loss is recognized by Jack and John combined on the 351 exchange?

A. $500,000

B. $200,000

C. $400,000

D. $0, since this transfer is subject to the non-recognition rule of 351