Mindy's Marble Shop has a net Section $1231$ gain in the current year of $$18,000.$ In the previous five years, there are $$13,000$ in unrecaptured Section $1231$ losses. How will Mindy's gain be taxed in the current year?

The $$18,000$ gain will be combined with long$-$term capital gains and losses and taxed at preferential rates.

Due to the unrecaptured losses, $$13,000$ will offset the current year's gain, and the remaining $$5,000$ is characterized as long$-$term capital gain.

Due to the unrecaptured losses, $$13,000$ will be recharacterized as ordinary income, and $$5,000$ will be characterized as long$-$term capital gain.

Due to the unrecaptured losses, $$13,000$ is characterized as unrecaptured Sec. $1250$ gain taxed at $25\%,$ and the remaining $$5,000$ is taxed at $15\%.$