Hans is a citizen and resident of Argentina. Hans does not hold a green card, and Argentina does not have an income tax treaty with the United States. At the start of Year 1, Hans paid $2.5 million for an apartment building 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 $2.9 million. Hans’ adjusted basis in the building at that time was $2.4 million.

2. What are the United States tax consequences of Hans’ United States activities?