Tax consequences

Hans, a citizen and resident of Argentina, is a retired bank executive. Hans does not hold a
green card. At the start of Year 1, Hans paid $2.5 million for a 20-unit apartment complex
located in the suburbs of Washington, D.C. Hans does not actively manage the building, but
rather leases it to an unrelated property management company that subleases the building
to the tenants. During Year 1, Hans had rental income of $300,000 and operating expenses
(depreciation, interest, insurance, etc.) of $220,000. On the advice of his accountant, Hans
made a Code Sec. 871(d) election in Year 1.
At the start of Year 2, Hans sold the building for $350,000. Hans’ adjusted basis in the
building at that time was $290,000. What are the U.S. tax consequences of Hans’ U.S.
activities?