When Pheasant Corporation was formed and capitalized under IRC 351, Kristen transferred property (basis of $26,000 and fair market value of $22,500) for IRC 1244 stock. Kristens basis in the Pheasant stock is $26,000. Kristen, who is single, owned the stock as an investment. Three years later, she sold her stock for $10,000. Kristens loss is:

a. $16,000 long-term capital loss.

b. $12,500 ordinary loss and $3,500 long-term capital loss.

c. $3,500 ordinary loss and $12,500 long-term capital loss.

d. $16,000 ordinary loss and $3,500 long-term capital loss.

e. $16,000 ordinary loss.