Question - Frederick, a CPA, provided accounting services to a client, James. On December 15 of the same year, James gave Frederick 100 shares of Franklin Corp. common stock as compensation for his services. The adjusted basis of the stock was $4,000, and its fair market value at the time of the transfer was $5,000. Two months later, Frederick sold the stock on February 15, for $7,500. What is the amount that Frederick should recognize as a gain on the sale of stock?
A) $7,500
B) $5,000
C) $2,500
D) $3,500