In 2018, Joe decided to help Sue by investing $25,000 in exchange for a 3% interest in Sue's Snacks, LLC which is treated as a partnership for tax purposes.Sue's Snacks is an active bakery business, but Joe has no active role in the business.

In March, 2019 Joe receives a 2018 Schedule K-1 (Form 1065) from Sue's Snacks.The K-1 contains the following information on Part III:

Line 1 Ordinary business income (loss) (3,000)

Line 5 Interest income100

Line 13 Charitable gifts300

a. How does the information on the Schedule K-1 affect Joe's taxable income?Be specific.

b. Assuming Joe has received no distributions from Sue's Snacks, what is his tax basis at the end of 2018?