Senior, Ltd., acquires all of the stock of JuniorCo for $30 million at the beginning of year 1. The group immediately elects to file income tax returns on a consolidated basis. Seniors operations generate a $50 million profit every year. In year 2, Jun- iorCo pays its parent a $9 million dividend. Operating results for JuniorCo are as follows.

Tax Year 1 Taxable Income $4 million

Tax Year 2 Taxable Income $12 million

Tax Year 3 Taxable Income $15 million

a. Compute Seniors basis in the JuniorCo stock as of the end of years 1, 2, and 3.

b. Same as part (a), except that JuniorCos tax year 2 produced a $6 million NOL.

c. Same as part (a), except that JuniorCos tax year 2 produced a $40 million NOL.