Constance Owns a Boutique

Multiple Choice

Constance 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 back 2 years or forward 20 years if not used in the current year.
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A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.