X Corp, which has had a valid S election in effect at all times, is owned equally by Hannah and Timothy, each of whom had a $6,000 basis in the stock as of January 1 of the current year. On July 1 of the current year, Hannah lent $7,000 to X Corp and received a market-rate interest-bearing promissory note from X Corp. X Corp has a $20,000 ordinary loss from business operations in the current year. What are the tax consequences to Hannah and Timothy in the current year? $10,000 loss deduction for Hannah and $6,000 for Timothy No loss deduction to either Hannah or Timothy $10,000 loss deduction for each shareholder $13,000 loss deduction for Hannah and $6,000 for Timothy