The Profit on reissue of forfeited shares is transferred to-

capital reserve

The correct answer is Option (3) → capital reserve

The profit on the reissue of forfeited shares is a capital profit for the company and is not available for distribution as a dividend to shareholders. Therefore, it is transferred to the Capital Reserve account.

The amount of profit is calculated as: $$\text{Profit}=\left(\text{Amount received on forfeiture}\right)-\left(\text{Loss on reissue}\right)$$

where the 'Loss on reissue' is the discount allowed on reissuing the shares. The maximum discount allowed on reissue cannot exceed the amount originally forfeited on those shares.