Jon owns 100 % of Jon , Inc ( JI ) . JI is liquidated and Jon receives land with a FMV of $500,000 and a tax basis of $300,000 and a building with a fair market value of $1,000,000 and a tax basis of $200,000 . The building is subject to a mortgage of $100,000 . Jon's basis in JI stock is $200,000 . JI has $3,000,000 of earnings and profits . As a result of the liquidation , Jon must recognize income of

A.

$1,200,000 capital gain

B.

$1,300,000 capital gain

C.

$0 income

D.

$1,400,000 dividend income