LO4,5 Sidney and Gertrude 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 2007. The bookstore reported the following net income (loss) for the years 2007 through 2010:

a. How much do Sidney and Gertrude have at risk in Bearcave at the end of each year (2007–2010)?

b. What amount can they recognize as income or loss from Bearcave for each year (2007–2010)?

c. Assume that Sidney and Gertrude materially participate in Bearcave for each year (2007–2010). What amount can they recognize as income or loss from Bearcave for each year (2007–2010)?

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2007 $(24,000) 2008 2009 2010 $(14,000) $(12,000) $5,000