X owns a rental building with a gross FMV of $1000, subject to a nonrecourse mortgage of $400. X's adjusted basis for this building is $300. A owns all of X's stock, with a total basis of $100. X has $200 of E&P. X is on the accrual method of accounting and reports on the calender year. Assume that the corporate tax payable by X on $700 gain is $250 and on $600 gain is $200. For each of the following determine and character of realized and recognized gain or loss to all parties, the time of recognition, and the transferee's basis in any property received in kind.

1. x sells the building, subject to mortgage to B in the current year for $600 in cash, x then liquidates, distributing to A all of the cash remaining after paying its taxes, in cancellation of A's stock in the current year.

a. B pays $300 in cash and gives B's $300 note payable in equal annual installments over five years. X's plan of liquidation prvides that X will stay in existence for five years for the sole purpose of collecting the note and paying the net amount over to A annually.