In 2019, Diego Transferred Property with an Adjusted Cost Base

In 2019, Diego transferred property with an adjusted cost base of $400,000 and a fair market value of $750,000 to an alter ego trust. In his will, Diego bequeaths all his property to his son. At his death in 2020, when the trust transfers the property to his son, the fair market value of the property has increased to $800,000. Diego uses any rollovers that are available to minimize the tax consequences. What are the tax consequences of these two transfers?

A) In 2019, a rollover would allow Diego to transfer his property to the trust tax free. In 2020, when the trust transfers the property to his son, the trust will include a taxable capital gain of $200,000 [(1/2) ($800,000 - $400,000) ] in income.
B) In 2019, there will be no rollover available, and Diego will include a taxable capital gain of $175,000 [(1/2) ($750,000 - $400,000) ] in income. In 2020, when the trust transfers the property to his son, there will be a rollover available, and the trust will not report any income.
C) There will not be a rollover available for either transaction. In 2019, Diego will report a taxable capital gain of $175,000 [(1/2) ($750,000 - $400,000) ] in income. In 2020, when the property is transferred to his son, the trust will include a taxable capital gain in income of $25,000 [(1/2) ($800,000 - $750,000) ].
D) Rollovers will be available to defer tax on both transactions.