Barb and Cat are sisters. In January, 20X5, Barb gave up land (cost $500,000) and got an office building (FMV $800,000; adjusted basis $700,000) from Cat. Barb sold the property received from Cat in June, 20X5 to a friend for $900,000. Which of the following statements is true with regard to these transactions?

1. Cat has no gain recognized in 20X5.

2. If Cat sells the land for $1,200,000 in 20X8, her gain would be $500,000 on the sale.

3. None of the answers provided is correct.

4. Barbs gain recognized in 20X5 is $300,000.

5. Barbs gain recognized on the June sale is $400,000.