Randy, age 63, is a participant in the stock bonus plan of XYZ, Inc., a closely held corporation. Randy received contributions in shares of XYZ stock to the stock bonus plan and XYZ, Inc. had the following income tax deductions:

Years	# of Shares	Deduction per Share At Time of Contribution
Year 1	100	$12
Year 2	125	$15
Year 3	150	$8
Year 4	200	$18
Year 5	400	$20
Total	975	Simple Average Price $14.75

Randy terminates employment in August of Year 6 and takes a distribution from the plant consisting of 975 shares of XYZ, Inc., having a fair market value of $24,000. If Randy sells the stock for $40,000 six months after receiving the distributions, which of the following statements are true?

1. Randy has ordinary income of $14,382 in year 6.

2. Randy has long term capital gain of $24,000 in year 6.

3. Randy has long term capital gain of $8,125 in year 6.

4. Randy has a short term capital gain of $16,000 in year 7.

a. 1

b. 4

c. 3&4

d. 2&4