Carmen purchased a business for $150,000 by investing $40,000 pf her own funds and borrowing $110,000 from Local National Bank. Carmen signed the note payable as a personal guarantor. In the first year of operation, the business had an operating loss of $120,000. The business incurred an operating loss of $45,000 in the second year and had operating income of $25,000 in the third year. What is the maximum carry forward loss deductible against the third year's income? Assume that carmen materially participates in the business.

A. $15,000

B. $20,000

C. $120,000

D. $45,000

E. $30,000