Sage Corporation Has Assets Worth $4,000,000 with an Adjusted Basis

Sage Corporation has assets worth $4,000,000 with an adjusted basis of $3,000,000.Ebony Corporation would like to acquire all of Sage's assets in a "Type C" reorganization in exchange for $2,800,000 of voting stock, $400,000 of cash, and assumption of Sage's liabilities of $800,000.All stock received by Sage will be distributed to its shareholders and Sage will then liquidate.Which, if any, of the following statements regarding this transaction is correct?

A) Sage will realize a gain of $1,000,000 and recognize a gain of $0.
B) Sage will realize a gain of $1,000,000 and recognize a gain of $400,000.
C) Sage will realize a gain of $1,000,000 and recognize a gain of $800,000.
D) Sage will realize a gain of $1,000,000 and recognize a gain of $1,000,000.
E) None of the above statements is correct.