Charles wants to relocate to Florida. He decided to sell his rental property, which is located in Brooklyn, NY. Charles accepted the following terms:

Charles received $1,200,000 in cash and was relieved of $800,000 mortgage. (this was the outstanding balance at the time the transaction closed). Charles was responsible for broker's fees and legal costs associated with transferring the mortgage of $35,000 and $17,500, respectively.

Charles' adjusted basis in the rental property is $600,000. (The $600,000 is net of $750,000 of accumulated depreciation expense. Calculate Charles' tax liability for this transaction? Use the following information to calculate) (Depreciation recapture is 25% and L/T Capital Gain at 20%)