A shareholder sells his S corporation stock and realizes a $500,000 gain. The stock had been held five years. Which of the following statements most completely describes the character of the gain?
◦ A long-term capital gain taxed at the 15%/20% capital gains rate. If the corporation owns collectibles, gain attributable to those assets will be taxed at the 28% long-term capital gain rate.
◦ Ordinary income to the extent of the shareholder's share of the businesses unrealized receivables and appreciation on inventory, with the balance taxed at the 15%/20% capital gain rate.
◦ The portion of the gain attributable to unrecaptured Sec. 1250 gain taxed at 25%, with the balance taxed at the 15%/20% capital gain rate.
◦ Both Ordinary income to the extent of the shareholder's share of the businesses unrealized receivables and appreciation on inventory, with the balance taxed at the 15%/20% capital gain rate and The portion of the gain attributable to unrecaptured Sec. 1250 gain taxed at 25%, with the balance taxed at the 15%/20% capital gain rate apply to the gain from the sale of S corporation stock.
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