Final answer:
Ginger experiences a loss of $32,000 in Year 1 from her share of the company's operating loss, and a gain of $20,600 in Year 2 from her share of the company's ordinary income, resulting in a net loss of $11,400. There is no matching option in the question provided.
Step-by-step explanation:
To calculate Ginger's total gain or loss, we need to consider the initial investment, the loan, and the company's performance over the two years. The initial investment in Root Corp. was $19,000 for 5% of the stock. Ginger also loaned the company $10,000. In Year 1, Root Corp. had a $640,000 operating loss. However, in Year 2, the company generated $412,000 in ordinary income.
If we assume that Ginger's 5% share in the company reflects a proportional share of the income and losses, then Ginger's portion of the loss in Year 1 would be 5% of $640,000, which equals $32,000. Ginger's share of the income in Year 2 would be 5% of $412,000, which equals $20,600.
Therefore, Ginger's loss in Year 1 is $32,000 but then she gains $20,600 in Year 2. The loan amount Ginger provided is not directly part of the gain/loss calculation because it is a debtor-creditor relationship (unless we account for interest, which isn’t mentioned).
Total loss in Year 1: $32,000
Total gain in Year 2: $20,600
Net Loss: $32,000 (loss) - $20,600 (gain) = $11,400 (loss)
Since no option matches the calculated net loss, it is possible there is either more information needed or there could be an error in the options provided.