Dara sells shares of stock she acquired by exercising options granted to her under an employee stock purchase plan (ESPP). The price she paid when she purchased the stock was the fair market value at the time; no discount was available. If Dara sells the stock for a profit in a qualifying disposition, how does she report the difference between her basis and the sale price?

a) compensation income subject to income tax, as well as social security and medicare taxes.

b) ordinary income.

c) short-term capital gain.

d) long-term capital gain.