On March 5, 2019, Meredith thought Birch stock was overvalued. Convinced the price would decline, she borrowed 100 shares of Birch from her broker at $35 per share. She then immediately sold the shares in a short sale. A few months later, the company posted better-than-expected earnings. On June 6, 2019, Meredith purchased 100 shares of Birch stock at $40 per share and then delivered them to her broker to close the short sale. How does Meredith report this transaction on her tax return?

a. $4,000 capital gain

b. $500 capital gain

c. $500 capital loss

d. $4,000 capital loss