1. Michael Smith, a dealer in securities bought a security on June 1 of year 1 for $80. On December 31^st of year 1, the fair market value of the security is $100.

a) What should Smith report in Year 1?

b) If Smith sells the security for $ 88 on July 10 in year 2, what should Smith report in year 2?

c) Gain or loss from mark-to-market under Code 475 will be recognized as what character?