Frame Company sells an apartment building for $200,000, of which $40,000 is allocated to the land under the building. Frame had acquired the property for $115,000 eight years earlier. At that time, $15,000 of the purchase price was allocated to the land. Frame took MACRS depreciation of $40,085. Frame Company has the following as a result of the sale:

1. 1. $105,085 Code Sec. 1231 gain
   2. $105,085 ordinary income
   3. $4,017 ordinary income and $101,068 Code Sec. 1231 gain
   4. $20,085 ordinary income and $81,000 Code Sec. 1231 gain
   5. None of the above is within $400 of the correct answer