On September 1, Year 1, Sam purchased for $9,200 cash a $10,000 bond with 10% annual interest that matures in Year 11. Sam did not elect to accrue market discount currently as interest income. On September 2, Year 2, Sam sold the bond for $9,400. The amount and character of gain Sam must recognize in Year 2 from this transaction is

$80 ordinary income; $120 short-term capital gain.

$200 short-term capital gain.

$600 long-term capital loss.

$80 ordinary income; $120 long-term capital gain.