1Kate bought a residential rental property for $500,000. She reported a total of $100,000 straight-line depreciation. Kate sold the building in 2019 for $425,000. What are the immediate tax consequences of the sale? (Do not consider Kate's other transactions.) If Kate's rental activity is a production-of-income (investment) activity, she will report a $25,000 long-term capital gain. I. If Kate's rental activity is a trade or business, she will report $25,000 of unrecaptured Section 1250 gain. I. a. Only statement I is correct. b. Only statement II is correct. c. Both statements are correct. d. None of the statements are correct. 2. Dallas Wildcat Drilling Co. sells an oil-drilling rig for $3,000,000. The drilling rig was purchased in 2013 for $2,000,000. Depreciation deductions of $1,200,000 have been taken up to the time of sale. What amount and character of gain will Dallas report from the sale of this asset