Sarah began a stained glass window business in 2001. In her first year, she incurred a loss of $5,000 due to the extensive materials she had to purchase. In 2002, she had a slightly smaller loss of only $4,000. She has deducted these losses on her income tax returns. Sarah received a notice in 2003 from the IRS stating that they have denied these losses under IRC 183 and that they will issue her a deficiency notice shortly. Sarah is engaged in her business for profit and thinks her losses will reverse in 2003 and that she will have a profit in 2003 and beyond.

1. What are Sarah's options?
2. What if Sarah had a loss in 2003 and did not file an IRC 183(e) election previously?
3. What if Sarah filed an election in 2002 and then continued to have losses past the fifth year?