J owns all the stock of T. T's only assets is a thoroughbred racing track with an adjusted basis of $1,200,000 and a fair market value of $3,000,000. J's basis in the T stock is $1,000,000. P, a corporate developer of shopping malls wants to acquire teh race track for a mall site. P and J agree on a Type C reorganization, with T trading the race track for P stock worth $2,580,000 and $20,000 in cash and then liquidating. P will give T some treasury shares P bought in the market for $2,000,000. Assume this will qualify as a good Type C reorganization to which T and P are "parties to a reorganization.

a Upon the distribution of the P stock and cash by T to J, J recognizes no gain due to Section 354.

b Upon the distribution of P stock and cash by T to J, J recognizes gain of $20,000. J's basis in the P stock will still be $1,000,000.

c Upon the distribution of P stock and cash by T to J, J recognizes $20,000 gain. J's basis in the P stock will be $1,000,000 less $20,000.

d None of the above.

Which is the correct answer and why?