P Corporation owns 100% of S Corporation's stock, and S owns 100% of T Corporation's stock. The three corporations have filed consolidated tax returns for several years. On January 1 of the current yea r, P's basis for its S stock is $5 million, and S's basis for its T stock is $3 million. The corporations' taxable incomes for the current year are $500,000 for P, $350,000 for S, and $250,000 for T. S and T pay no dividends during the year. Each corporation pays its portion of the consolidated tax liability. The corporate tax rate is 21%.

a. Determine P's basis for its S stock and S's basis for its T stock at the end of the current year.

b. Assume the same facts as in Part a except S pays an $80,000 dividend to P and T pays a $90,000 dividend to S. Determine P's basis for its S stock and S's basis for its T stock at the end of the current year.