"then the net taxable is $200,000 which agrees to the cash flow profit above."

Here's another way to spot your error:

The final distribution will be from cash on hand as $1m. That's because there was $400k into the real estate, $1m out, and unless you forgot to mention some other activity such as debt payoff, the final distributed Cash is $1m. The distribution that closes the entity is the entire cash. You did the math as $600k profit minus $400k basis, but it's $1m sale, so that is a Sum, not a Minus, event. It's either two parts as Profit and Basis, or it's two parts as Gross minus original investment, to get to the taxable amount.

It's all about perspective.