Doesn't it cause higher and higher basis every year? I.e. in the second year of this repurchase by the company, his basis will be rather high (this is a very large S-Corp with substantial earnings each year) but only three years left.  So if I divide the stock basis by 3 in year 2, and then by 2 in year 3, and the full stock basis in yr 4, he is going to get a higher and higher basis. Of course, it will be somewhat reduced by the decrease of stock ownership, but as I mentioned the company is paying him higher and higher ordinary income and interest as well.

Please correct me if I am talking nonsense here. 🙂

Also, regarding the AAA. I have no access to that as I only receive the K-1. That reduction will be done by the company itself.

Thank you!