26. LO.6, 7 Orange, Inc., a calendar year corporation in Clemson, South Carolina, elects S corporation status for 2021. The company generated a $74,000 NOL in 2020 and another NOL of $43,000 in 2021.

Orange stock always is owned by the same four shareholders, each owning 25%

of the stock. Pete, one of the shareholders, holds a $6,020 basis in this Orange stock at the beginning of 2021. Identify the Federal income tax issues that Pete faces.