In Year 1, Charlotte, an attorney, performs extensive legal services for her client. She agrees to accept stock (traded on the New York Stock Exchange) with a value of $75,000 for her services. By the end of Year 1, the value of the stock has decreased to $40,000; but Charlotte has confidence in the company and continues to hold the stock. Her good judgment is vindicated in Year 2, as Charlotte continues to hold it and it shoots up in value to $90,000. Charlotte then sells the stock for $90,000 on December 15^th of Year 2.

Assume that Charlotte has no other income in Year 1 or Year 2. What is Charlottes gross income for Year 1?

1. $75,000, the stocks value on receipt.
2. $40,000, the stocks value at the end of the year.
3. $90,000, the price Charlotte receives for the stock on sale.
4. None of the above.