C owns 60 hsares and D owns 40 shares of Z corporation, representing all of the outstandign shares. C and D are otherwise unrelated individuals. C sells all of the Z stock to D for $600 in cash and $3,000 in notes payable over a 20 year period. Z pays off D's notes as payments fall due.

a Under these facts, C may transfer the obligation to Z without any additional tax implications.

b Under the Wall case, D would receive corporate distributions from Z. If E&P is present, there would be a dividend.

c Neither of the above.

Which is the correct answer and explain why?