Mr and Mrs Churchill Operate a Small Business

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 1998 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) Ordinary gain
B) Capital gain
C) $538,000 ordinary gain and $100,000 Section 1231 gain
D) Section 1231 gain