In March of Year 1, Gerhard purchased an office building in Arizona. He paid $600,000 cash and obtained a mortgage of $2,400,000 for the balance. In June of Year 5, the outstanding mortgage on the office building was $1,500,000 and the building was worth $4,500,000.
In September of Year 1, Harold purchased an office building in Denmark in Year 1 for $500,000 in a cash deal. In August of Year 2, he purchased a warehouse in Nevada for $1,500,000 in a cash deal. He subsequently obtained a loan against the warehouse. In June of Year 5, the outstanding loan on the warehouse was $1,200,000. In that same year, the value of the warehouse was $3,300,000 and the value of the Danish building was $800,000.
In June of Year 5, Gerhard transfers the Arizona building to Harold in exchange for Harold's Danish building, his warehouse and cash. They each agree to assume the debt on the property received.
What is Gerhard's recognized gain/loss in Year 5?