Creditor, an individual, purchases from a third party, as an investment, an individual Debtors $5,000 interest-bearing note at a cost of $4,000. Several years later Debtor pays off the notes principal using Jupiter Power stock that Debtor had purchased several years ago for $2,000, which stock is now worth $5,000. What is the amount of gain or loss realized and recognized by Debtor, and what is its nature? (For this purpose, disregard all interest income/expense; and assume that Debtor is not a dealer in notes or in stock):

1. $5,000 ordinary income
2. $3,000 ordinary income
3. $5,000 short-term capital gain
4. $3,000 long-term capital gain
5. $5,000 long-term capital loss

Same facts as in previous Creditor-Debtor question. What is the amount of gain or loss realized and recognized by Creditor; and under the current Internal Revenue Code how would that gain or loss be characterized? (For this purpose, disregard all interest income/expense; and assume that Creditor is not a dealer in notes or in stock):

1. $5,000 long-term capital gain.
2. $5,000 ordinary income
3. $1,000 long-term capital gain
4. $1,000 short-term capital gain.
5. $1,000 ordinary income.