Z owns a rental building (its only asset) with a gross fair market value of $5,000 subject to the non-recourse mortgage of $2,000. Zs adjusted basis for this building is $1,500. All of Zs stock is owned by C, whose basis for his stock in Z is $500. Z had 1,000 of E&P. Z is on the accrual method of accounting and reports on the calendar year. Assume that the corporate tax payable by Z on $3,500 gained is$1250 and on $3,000 gained is $1,000. C contributes to Z securities with a basis of $5,000 and a value of $1,500 in the preceding year so that Cs stock basis increases to $5,500. Z then sells the securities to D for $1,000 along with the building as previously sold. a. Z will recognize a $4,000 loss on the sale of the securities. b. Z will recognize a $500 loss on the sale of the securities under 336(d)(2), unless the presumption of tax avoidance purpose is rebutted. c. Neither of the above.