Arnie is a 50% shareholder in Energy Corporation, an S Corp. When the company was formed, Arnie's basis in the stock was $32,000 and he also loaned $4,000 to the corporation evidenced by an unsecured note. During its first year, the corporation lost $80,000 (in total). During its second year, the company had $10,000 of ordinary income (in total). In addition, the company had $100,000 of other liabilities owed to various creditors (non-shareholders) at the end of the 1st year and $75,000 at the end.

1. What income/loss must Arnie report on his tax return for each year?

2. What income/loss must Arnie report on his tax return for each year?