An office building in Trenton, NJ was purchased for $6,000,000. Closing costs incurred in acquiring the building was $250,000. Based on the most recent real estate invoice the county assessed the land at $850,000 and the building at $5,300,000. A cost segregation study is done and 10% of the building is reallocated to personal property. The property is placed in service on May 1, 2018 and sold on March 10, 2019. The cost recovery periods are 39.0 years for real property (mid-month convention) and 7 years for personal property (MACRS table 14.29% and 24.49%).

- What is the basis of the building at the time of acquisition?

The land, building and personal property was sold for $7,000,000. The proceeds were allocated as follows:

Land $1,000,000, Building $5,500,000 and personal property $500,000.

- Calculate the gain on sale?

- Calculate the tax liability? Assume ordinary tax rate is 35%.