In 2011, Larry transferred property with an adjusted basis of $20,000 and a fair market value of $15,000 to a corporation in exchange for stock. Code Sec. 351 applies to the transfer and the stock qualifies as Code Sec 1244 stock. Larry sold the stock in 2014 for $4,000. The result of the sale is:

1. $16,000 long-term capital loss
2. $16,000 ordinary loss
3. $11,000 long-term capital loss and $5,000 ordinary loss
4. $11,000 ordinary loss and $5,000 long-term capital loss