Birch Corporation, a calendar-year corporation, was formed three years ago by its sole shareholder, James, who has operated it as an S corporation since its inception. Last year, James made a direct loan to Birch Corporation in the amount of $7,550. Birch Corporation has paid the interest on the loan but has not yet paid any principal. (Assume the loan qualifies as debt for tax purposes.) For the year, Birch experienced a $30,400 business loss. What amount of the loss clears the tax-basis limitation, and what is Jamess basis in his Birch Corporation stock and Birch Corporation debt in each of the following alternative scenarios?

a. At the beginning of the year, James's basis in his Birch Corporation stock was $50,100 and his basis in his Birch Corporation debt was $7,550.

Amount of loss clearing tax basis limitation
Basis in stock
Basis in debt

b. At the beginning of the year, James's basis in his Birch Corporation stock was $11,150 and his basis in his Birch Corporation debt was $7,550.

Amount of loss clearing tax basis limitation
Basis in stock
Basis in debt

c. At the beginning of the year, James's basis in his Birch Corporation stock was $0 and his basis in his Birch Corporation debt was $7,550.

Amount of loss clearing tax basis limitation
Basis in stock
Basis in debt