In the current year, Billy sold for $9,000 a machine acquired several years ago for $12,000. He had accumulated depreciation of $10,000 on the machine. How is the realized gain or loss on the sale reported?

($3,000) ordinary loss (section 1231); $0 ordinary gain (section 1245)

$0 LTCG (section 1231); ($3,000) ordinary loss (section 1245)

$7,000 LTCG (section 1231); $0 ordinary gain (section 1245)

$0 LTCG (section 1231); $7,000 ordinary gain (section 1245)

($1,000) ordinary loss (section 1231); $0 ordinary gain (section 1245)