On January 1, 2020, Leo paid $28,000 for 6 percent of the stock in BLS, an S corporation. In November, he loaned $10,000 to BLS in return for a promissory note. BLS generated a $730,000 operating loss in 2020. BLS generated $421,000 ordinary business income in 2021.

Required:

1. How much of Leos share of this income is included in his 2021 taxable income?
2. Compute Leos basis in his BLS stock and his BLS note at the end of 2021.
3. How would your answers to parts a and b change if BLSs ordinary business income was only $233,000?