Darin has a tax basis of $7,000 and an at-risk amount of $5,000 in a partnership where he is a 25% owner. The partnership incurred a loss of $40,000 in the current year. How much of the loss will be allocated to Darin and how much will he be able to deduct in the current year assuming he materially participates in the business?

a. $10,000 of the loss will flow-through to Darin, and he will be able to deduct $5,000.

b. $10,000 of the loss will flow-through to Darin, and he will be able to deduct $10,000.

c. $10,000 of the loss will flow-through to Darin, and he will be able to deduct $7,000.

d. $40,000 of the loss will flow-through to Darin, and he will be able to deduct $10,000.