Response to the following problem:
In February 2010, Hainey paid $140,000 for a certified historic structure ($30,000 allocated to the land). During the next 14 months, Hainey spent $150,000 to rehabilitate the building. The building was placed in service as Hainey's office building on May 4, 2011. Hainey took the rehabilitation credit in that year and used MACRS to depreciate the remaining basis in the building. On July 19, 2014, he sold the building. His amount realized from the sale was $295,000, with $35,000 allocated to the land.
Compute the realized and recognized gain on the sale of the building. Be sure to discuss the nature of the gain and how it is treated in the netting process.