Tom and Gail form Owl Corporation with the following consideration:

	Consideration Transferred
	Basis to Transferor	Fair Market Value	Number of Shares Issued
From Tom Cash Installment note	$50,000 240,000	$50,000 350,000	40
From Gail Inventory Equipment Patentable invention	$60,000 125,000 15,000	$50,000 250,000 300,000	60

Gail is considering an alternative to 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 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. Referring to Appendix F, assume a discount rate of 6%. Further, assume Gails marginal income tax rate is 28% and her capital gain rate is 15%.