Abigail, Bobby, and Claudia are equal owners in Lafter, an S corporation that was a C corporation several years ago. While Abigail and Bobby actively participate in running the company, Claudia has a separate day job and is a passive owner. Consider the following information for 2015:

• As of January 1, 2015, Abigail, Bobby, and Claudia each have a basis in Lafter stock of $15,000 and a debt basis of $0. On January 1, the stock basis is also the at-risk amount for each shareholder.

• Bobby and Claudia also are passive owners in Aggressive LLC, which allocated business income of $14,000 to each of them in 2015. Neither has any other source of passive income (besides Lafter, for Claudia).

• On March 31, 2015, Abigail lends $5,000 of her own money to Lafter.

• Anticipating the need for basis to deduct a loss, on April 4, 2015, Bobby takes out a $10,000 loan to make a $10,000 contribution to Lafter. Bobby uses his automobile ($12,000 fair market value) as collateral.

• Lafter has an accumulated adjustments account balance of $45,000 as of January 1, 2015.

• Lafter has C corporation earnings and profits of $15,000 as of January 1, 2015.

• During 2015, Lafter reports a business loss of $75,000, computed as follows:

Sales revenue.................................$90,000

Cost of goods sold...........................(85,000)

Salary to Abigail.............................(40,000)

Salary to Bobby..............................(40,000)

Business (loss)..............................($75,000)

• Lafter also reported $12,000 of tax-exempt interest income.

a) What amount of Lafter's 2015 business loss of $75,000 are Abigail, Bobby, and Claudia allowed to deduct on their individual tax returns? What are each owner's stock basis and debt basis (if applicable) and each owner's at-risk amount with respect to the investment in Lafter at the end of 2015?

• During 2016, Lafter made several changes to its business approach and reported $18,000 of business income, computed as follows:

Sales revenue.......................$208,000

Cost of goods sold..................(90,000)

Salary to Abigail....................(45,000)

Salary to Bobby.....................(45,000)

Marketing expense..................(10,000)

Business income....................$ 18,000

• Lafter also reported a long-term capital gain of $24,000 in 2016.

• Lafter made a cash distribution on July 1, 2016, of $20,000 to each shareholder.

b) What amount of gain/income does each shareholder recognize from the cash distribution on July 1, 2016?