On January 2, 2010, David Loans His S Corporation $10,000

On January 2, 2010, David loans his S corporation $10,000, and by the end of 2010 David's stock basis is zero and the basis in his note has been reduced to $8,000. During 2011, the company's operating income is $10,000. The company also makes distributions to David of $11,000. Which statement is correct?

A) $1,000 LTCG.
B) $3,000 LTCG.
C) $11,000 LTCG.
D) Loan basis is $10,000.
E) None of the above statements is correct.