Corporation W owns 100% of the common stock of Corporation Z with a basis of $300. Z owns a rental building (its only asset) with a gross fair market value of $3,000, subject to a non-recourse mortgage of $1,200. Zs 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 Corporation V for $1,800 cash, subject to the debt. W owes Z additionally $1,200. Same facts as above, and W owes Z additionally $1,200.

a. W has forgiveness of indebtedness income on the liquidation.

b. Section 332 does not apply.

c. Section 332 applies and W recognizes no income

d. None of the above.