On December 31, 2006, Pace Co

On December 31, 2006, Pace Co. is in financial difficulty and cannot pay a note due that day. It is a $600,000 note with $60,000 accrued interest payable to Stevens, Inc. Stevens agrees to accept from Pace equipment that has a fair value of $290,000, an original cost of $480,000, and accumulated depreciation of $230,000. Stevens also forgives the accrued interest, extends the maturity date to December 31, 2009, reduces the face amount of the note to $250,000, and reduces the interest rate to 6%, with interest payable at the end of each year.
-Pace should recognize a gain or loss on the transfer of the equipment of

A) $0.
B) $40,000 gain.
C) $60,000 gain.
D) $190,000 loss.