Describe Tax issues while transferring property from proprietorship business to a corporation.

Two years ago Jorge transferred property he had used in his sole proprietorship to Flycatcher Corporation, a newly formed corporation, for 50 shares of Flycatcher stock. The property had an adjusted basis of $300,000 and a fair market value of $800,000. Six months later Jorge's friend, Polly, transferred property she had used in her sole proprietorship to Flycatcher Corporation for 50 shares of Flycatcher stock and cash of $100,000. Her property had an adjusted basis of $150,000 and a value of $900,000. Both Jorge and Polly serve on Flycatcher's board of directors. In addition, Polly has a contract with Flycatcher to perform consulting services for the corporation. In the current year, Flycatcher Corporation redeems all of Polly's Flycatcher stock for property with a probable value of $1.4 million. What are the tax issues for Polly and Flycatcher?