X is a calendar year-end corporation with the dollar as its functional currency. On 10/1/2014, X enters into a forward contract to buy 100,000 Euros for delivery on 3/1/2015. By 12/31/2014, the forward contract has appreciated by $1,000. Assuming thereare regulatedfuturescontractstradedinEuros,whatistheamountandcharacter of taxable income/(loss) X recognized on 12/31/2014? Assume X does not make any special elections.

1. $0

2. $1,000 Ordinary Income

3. $400 Short Term Capital Gain and $600 Long Term Capital Gain

4. $1,000 Long Term Capital Gain