Tree Corp. and Branch Co. are related for tax purposes. Tree operates as a retail outlet and Branch Co. operates as a wholesale unit. During Year 1, Tree Corp. purchased inventory for $5,000. The inventory had a market value of $7,500 in the wholesale market, and a value of $11,000 in the retail market. Tree sold the inventory to Branch Co. for $5,000. Branch then sold the inventory to other retail outlets