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 $8,500. What is Pekoe’s recognized loss? 

a. $6,500 

b. $4,000 

c. $3,000 

d. $2,000 

e. $1,000