A zero coupon bond with a face value of $250,000 and a term of 6 years is issued for $229,000.

How much income should be recognized by the holder in the year that it matures and what is the character of that income?

a.$3,500 of ordinary income

b.$3,500 of capital gain

c.$21,000 of capital gain

d.$3,500 of ordinary income & $17,500 of capital gain