Pekoe sold stock to his sister Rose for $12,000, its fair market value. Pekoe bought the stock 5 years ago for $16,000. Also, Pekoe sold Earl (an unrelated party) stock for

$6,500 that he bought 3 years ago for $9,500. What is Pekoe’s recognized gain or loss?

a. $7,500 loss

b. $4,000 gain

c. $3,000 loss

d. $2,000 loss

e. $1,000 gain