Sidney and Gertrude Pearson own 40% of Bearcave Bookstore, an S corporation. The remaining 60% is owned by their son Boris. Sidney and Gertrude do not participate in operating or managing the store and they invested $19,000 in the business when it opened in 2013. The bookstore reported the following net income (loss) for the years 2013 through 2016:

___2013 __________2014 ___________2015 __________2016

$ (24,000) .......... $ (14,000) ......... $ (12,000) ......... $ 5,000

a. How much do Sidney and Gertrude have at-risk in Bearcave at the end of each year (2013-2016)?

b. What amount can they recognize as income or loss from Bearcave for each year (2013-2016)?

c. Assume that Sidney and Gertrude materially participate in Bearcave for each year (2013-2016). What amount can they recognize as income or loss from Bearcave for each year (2013-2016)?