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 2015. The bookstore reported the following net income (loss) for the years 2015 through 2018:

a. How much do Sidney and Gertrude have at-risk in Bearcave at the end of each year (2015-2018)?

b. What amount can they recognize as income or loss from Bearcave for each year (2015-2018)?

c. Assume that Sidney and Gertrude materially participate in Bearcave for each year (2015-2018). What amount can they recognize as income or loss from Bearcave for each year (2015-2018)?

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2015 $ (24,000) 2016 2017 $ (14,000) 2018 $ (12,000) $ 5,000