Best in Baseball, Inc. $($BIBI$)$ has always been an S corporation and is owned equally by individuals Rose, Bench, and Morgan. Several years ago, BIBI invested in sports memorabilia. The memorabilia is unique, has a strong $$collectible$$ resale market, and has appreciated in value by $$180,000.$ BIBI has no other assets which would generate special tax treatment if sold. In $2024,$ Bench sells his $1/3$ stock ownership in BIBI to Griffey for $$600,000,$ at a time when his adjusted stock basis is $$200,000$ and, thus realizes $$400,000$ of pre$-$look$-$through long$-$term capital gain. If BIBI sold its memorabilia at FMV immediately before the stock sale to Griffey, Bench would have been allocated $$60,000($$$180,000$ x $1/3)$ of $$collectibles$$ gain subject to higher capital gains tax rates on his individual return. Which one of the following statements is CORRECT?

Bench must recognize $$60,000$ of ordinary income gain on account of the collectibles held by BIBI on the date he sold his stock to Griffey.

The difference between Bench$$s pre$-$look$-$through long$-$term capital gain and the look$-$through capital gain is his residual long$-$term capital gain on the sale of the S corporation stock.

Since the memorabilia was not sold by BIBI, Bench must recognize the $$400,000$ pre$-$look through gain as a long$-$term capital gain, without any other special treatment.

Bench$$s pre$-$look$-$through long$-$term capital gain is reduced to zero due to the look$-$through capital gain on the collectibles.