On October 1, Paula Exchanged an Apartment Building (Adjusted Basis

Multiple Choice

On October 1, Paula exchanged an apartment building (adjusted basis of $375,000 and subject to a mortgage of $125,000) for another apartment building owned by Nick (fair market value of $550,000 and subject to a mortgage of
$125,000) .The property transfers were made subject to the mortgages.What amount of gain should Paula recognize?

A) $0
B) $25,000
C) $125,000
D) $175,000