Problem:
Orange Inc, a calendar year corporation in Clemson, South Carolina, elects S corporation status for 2014. The company generated a $74,000 NOL in 2013 and another NOL of $43,000 in 2014. Orange recorded no other transactions for the year. At all times in 2013 and 2014, the stock of the corporation is owned by the same four shareholders, each owning 25% of the stock. Pete, one of the shareholders, holds a $6,020 basis in the Orange stock at the beginning of 2014.
Requirement:
Question 1: Identify the Federal income tax issues that Pete faces. Please present complete computation and also provide full description.