They destroyed the sandcastle in an act of malevolence

A. Sportsmanship

B. Jealousy

C. Ill will

D. Bad manners

The answer is C. ill will.

I believe the correct answer is C. ill will.

Ill will means hostility, bitterness, animosity, hatred, etc. so if these people destroyed something out of malevolence, they are probably exhibiting ill will.

Sportsmanship is a good thing so it is not applicable here; jealousy could be correct too, but it is too mild a feeling in this context; bad manners too.