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 2018: As of January 1, 2018, 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 2018. Neither has any other source of passive income (besides Lafter, for Claudia). On March 31, 2018, Abigail lends $5,000 of her own money to Lafter. Anticipating the need for basis to deduct a loss, on April 4, 2018, 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 the sole collateral for his loan (nonrecourse). Lafter has an accumulated adjustments account balance of $45,000 as of January 1, 2018. Lafter has C corporation earnings and profits of $15,000 as of January 1, 2018. During 2018, 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. During 2019, 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 2019. Lafter made a cash distribution on July 1, 2019, of $20,000 to each shareholder.

1. What amount of Lafters 2018 business loss of $75,000 are Abigail, Bobby, and Claudia allowed to deduct on their individual tax returns?

2. a-2. What are each owners stock basis and debt basis (if applicable) and each owners at-risk amount with respect to the investment in Lafter at the end of 2018?

3. b. What amount of gain/income does each shareholder recognize from the cash distribution on July 1, 2019?