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. Senior’s operations generate a $50 million profit every year. In year 2, JuniorCo pays its parent a $9 million dividend. Operating results for JuniorCo are as follows. Compute Senior’s basis in the JuniorCo stock as of the end of years 1, 2, and 3. All tax years occur after 2017.

Tax Year .........................Taxable Income
1 ..........................................$ 4 million
2 ...........................................12 million
3 ............................................15 million