Question: Larry buys a building in 2005 for $14 million. He pays cash of $1 million and takes out a mortgage for $13 million. From 2005-2012,

Larry buys a building in 2005 for $14 million. He pays cash of $1 million and takes out a mortgage for $13 million. From 2005-2012, he claims $8 million of depreciation on the building. In 2013, when the building is worth $5 million, Larry is in default on the mortgage payments and the building is foreclosed on (or relieved of) by the bank. What is Larry's gain or loss recognized in 2013?

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