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 $7,450. 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 $34,200 business loss.

What amount of the loss clears the tax-basis limitation, and what is James's basis in his Birch Corporation stock and Birch Corporation debt in each of the following alternative scenarios?

Note: Leave no answer blank. Enter zero if applicable.

a. At the beginning of the year, James's basis in his Birch Corporation stock was $52,700 and his basis in his Birch Corporation debt was $7,450.

b. At the beginning of the year, James's basis in his Birch Corporation stock was $10,200 and his basis in his Birch Corporation debt was $7,450.

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 $7,450.

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