Annette has a section 1231 gain from the sale of land in 2022 of $5,000. She also has nonrecaptured net section 1231 losses from 2019 of $3,500. How is Annette's $5,000 gain treated in 2022?

The $5,000 gain will be treated as a long term capital gain and taxed at Annette's long term capital gain rate.

$3,500 will be taxed as ordinary income and $1,500 gain will be taxed at Annette's long term capital gain tax rate.

The $5,000 gain will be treated as ordinary income.

$1,500 will be taxed as ordinary income and $3,500 gain will be taxed at Annette's long term capital gain tax rate.