State best option classification for the options in the following scenario: Bro Inc. granted a Stock Option for 10 shares to Mary (an employee) on March 3, Year 1. The option price on the date of grant was $800 per share, and the exercise price was $790 . She exercised the option on September 5, Year 1, when the FMV was $2,000 per share. She sold the stock on December 1, Year 3, for $2,500 per share. Mary owns 7% of Bro Inc.

1. Employee Stock Purchase Plan 2. Nonqualified Option 3. Incentive Stock Option 4. Both 1 and 3 are possible