Charles, a surgeon, is a knowledgeable art lover, and he browses the flea markets and garage sales in the hope of finding an undiscovered treasure. At one garage sale in May of Year 1, Charles sees a small painting that he believes may well be the work of the 15th-century French artist Jean Fouquet, who is credited with inventing the portrait miniature. Many of his early works were believed to have been lost in the French Revolution, but a few have since been found in unexpected places. Charles bargains down the price from the $150 marked price to $100. After the purchase, he enlists the help of the worlds foremost expert of Jean Fouquets work, who confirms in December of Year 1 that the work is authentic and has a likely market value of $1 million. Charles properly insures the work and hangs it on his wall to enjoy. In Year 4, however, Charles decides that he would rather have the cash and sells the painting through an art auction house for $3 million. Describe his tax consequences with respect to the purchase in Year 1 and the sale in Year 4.