Pekoe sold stock to Rose for $12,000, its fair market value. The stock cost Pekoe $16,000 5 years ago. Also, Pekoe sold Earl (an unrelated party) stock for $6,500 that cost $8,500 3 years ago. Rose and Pekoe are brother and sister. What is Pekoe’s recognized loss?

a. $6,500
b. $4,000
c. $3,000
d. $2,000
e. $1,000