Several years ago, Mr. Kerry Johnson's corporate employer granted him options to purchase 1,000 shares of the employer at a price of $13.25 per share. At that time, the shares were trading at $13.25 per share. The employer is a publicly traded company. During June, 2021, Mr. Johnson exercises the options. At this time, the shares are trading at $18.50 per share. Prior to the end of the year, Mr. Johnson sells the shares for $19.75 per share. Determine the effect of these transactions on Mr. Johnson's net and taxable income. Where relevant, identify these effects separately.