Imelda has accepted a job as a key executive. In her multi-million-dollar compensation negotiations, she elects to receive a substantial portion of her compensation in incentive stock options that she plans to exercise in qualifying dispositions. She will be taxed at long-term capital gain rates. Why would she make this election instead of taking her compensation entirely as wages?

• Stock held over a year is not subject to taxation.
• Her W-2 wages is taxed is at a higher rate than her effective tax rate.
• Her long-term capital gain rate is higher than her marginal tax rate.
• Her long-term capital gain rate is lower than her marginal tax rate.