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

On January 2, 2010, Tim loans his S corporation $10,000. By the end of 2010, Tim'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 Tim of $8,000. Which statement is correct?

A) Loan basis is now $10,000.
B) $8,000 LTCG.
C) Stock basis is $2,000.
D) $2,000 LTCG.
E) None of the above statements is correct.