Corporation W onws 100% of the common stock of Corporation Z with a basis of $300. Z owns a rental building (its only assets) with a gross fair market value of $3,000, subject to a non-recourse mortgage of $1,200. Z's adjusted basis for this building is $900. Z has $600 of E&P. Z is on the accrual method of accounting and reports on the calendar year. Z and W do not report on a consolidated basis. Z distributes the building to W in complete liquidation and W sells the building to Corparation V for $1,800 cash, subject to the debt.

a W recognizes no gain on the liquidation under Section 332.

b Z has gain on the liquidation under Section 336

c W would recognize no gain on the sale to V.

d All of the above

e None of the above.

Which one is the correct answer and why?