Three years ago, Mr. Lewis paid $40,000 for a newly issued corporate bond with a $50,000 stated redemption value. This year, he sold the bond for $43,900. Through date of sale, Mr. Lewis recognized $940 of the original issue discount (OID) as accrued interest income. Compute his gain or loss on sale.

a. $2,960 long-term capital gain

b. $2,960 ordinary income

c. $3,900 long-term capital gain

d. $3,900 ordinary income

THIS IS A TAX CLASS