I was asked for my opinion but have little experience with this and would appreciate any thoughts:

A 501 C8 sells their building in April 2023, but leases back half.  They are a fiscal year ending May 31.  The portion they did not lease back was the ballroom.  They held all their meetings in the ballroom prior to the sale.  They also rented the ballroom to organizations and individuals for private events.  Those rentals resulted in rental income, not to a significant degree.  

They have not rented the ballroom since pre-Covid.  Their CPA feels the sale of the ballroom is taxable at 50% rate, for the portion they rented it privately.  Proceeds 1,250,000.  Basis 250,000.  CPA feels they should be taxed on $500,000 capital gain. .  

In reading publication 598, page 11 lists an paragraph indicated a possible exclusion for the sale.
Does anyone have any experience / knowledge?  Would appreciate your thoughts on whether this is a taxable transaction to any degree or can it be excluded on the 990 based on publication 598 exclusion. 

I am specifically relying on sections 512(b)(3)(i) and 512(b) 5, in my opinion that the rental income and gain on the sale of real property is excluded:

Thank you