HI i need help with this problem. Can you walk me through?

Consrance owns a boutique. During the current year she has gross income of $400,000 and allowable deductions related to the business of $425,000.

I. Constance has incurred a transaction loss, which represents her unrecovered cost of capital.

II. Constance has suffered an annual loss which may be carried forward indefinitely

A.)Only statement I is correct

B.) only statement II js correct

C.) Both statements are correct

D.) Neither statement is correct