John owns stock in an S corporation. John’s share of the corporation’s loss for the year is

$5,000. His adjusted basis in the corporation stock is $1,000. In addition, John has a loan outstanding to the corporation in the amount of $2,000. What amount, if any, is John entitled to deduct with respect to the loss, assuming he meets the at-risk and passive activity requirements?

a. $5,000

b. $3,000

c. $2,000

d. $1,000

e. None of the above