Mr. and Mrs. Churchill operate a small business. This year, the Churchills sold a commercial office building used in their business for $1.5 million. They purchased the building in 1999 for a cost of $1.4 million and had deducted $538,000 MACRS depreciation through date of sale. The Churchills should characterize the $638,000 gain recognized on sale as:
A. Capital gain
B. Section 1231 gain
C. Ordinary gain
D. $538,000 ordinary gain and $100,000 Section 1231 gain
Answer: B
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