On October 1, Joyce exchanged an apartment building (adjusted basis of $575,00 and subject to a mortgage of $225,000) for another apartment building owned by Theodore (fair market value of $850,000 and subject to a mortgage of $225,000). The property transfers were made subject to the outstanding mortgages. What amount of gain should Joyce recognize?

a. $0. b. $175,000. c. $225,000. d. $275,000.