In year 5, Naxos Inc., a C corporation, sold Section 1250 property for $400,000 that had an adjusted basis of $250,000, resulting in a gain of $150,000. The original cost of the property, which Naxos had purchased in year 1, was $350,000 and $100,000 of total depreciation had been taken on the property. Had straight-line depreciation been used, depreciation would have been $60,000. How should Naxos report the gain on its year 5 tax return?
a. $40,000 ordinary gain and $110,000 long-term capital gain
b. $52,000 ordinary gain and $98,000 long-term capital gain
c. $150,000 ordinary gain
d. $48,000 ordinary gain and $102,000 long-term capital gain