. Mr. Archer, who is employed by Public Co. Ltd., was granted an option in year one to purchase up to 5,000 common share

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. Mr. Archer, who is employed by Public Co. Ltd., was granted an
option in year one to purchase up to 5,000 common shares at $13
after completion of his sixth year of employment. The fair market
value of the common shares at the time of granting the right was
$12. He does not have any other shares. During Mr. Archer seventh
year of employment, he decided to exercise part of his right and
purchased 1,000 shares with a fair market value of $15 at that
date. Three years later, Mr. Archer sold the shares at $25 per
share. Discuss the tax