Heart Corporation has net assets valued at $1 million and an NOL of $250,000 . On December 31 of last year, Heart is acquired by Brain Corporation, a calendar year taxpayer, in a restructuring qualifying as a tax-free reorganization. Heart shareholders receive 45% of Brain's shares in exchange for all of the Heart stock. Assuming that the Federal long-term tax-exempt rate is 5% and Brain's
discount factor is 10%, what is the maximum amount that Brain can use of Heart's NOL this year?
a. $12,500
b. $50,000
c. $100,000
d. $250,000
e. None of the above
b
RATIONALE: Since there has been more than a 50 percentage point ownership change, the § 382 limitation applies. The maximum amount of NOL that can be utilized in any one year is $50,000 ($1 million × 5%).
You might also like to view...
Refer to Additional Case 15.1. Which manager has general responsibility for day-to-day management-labor relations at Billiards, Inc?
Additional Case 15.1 Billiards, Inc. makes collapsible pool cues and other billiard products. Tegau, the general manager, has called a management team meeting with Tammy, the director of HR; Gary, the VP of operations; Ramonia, the employee relations specialist; and Ryan, a labor relations consultant. Tegau wants ideas from her management team about what to do concerning the possible unionization of their workers. Tammy suggests that they do nothing, let the union conduct its vote, and if certified, treat it as a legitimate worker representative of the workers. Gary says the firm should begin aggressively opposing union organization. He thinks first-line supervisors should be brought in and told that if workers in their areas vote for the union, the supervisors will lose their jobs and the company might sell off the unionized part of the business. Ramonia suggests that Billiards, Inc. tell the employees about their current plans to upgrade employee benefits and working conditions—a project she's worked on for the last six months. Management decides to mildly oppose the union but the union is certified anyway. Tegau is now in her first contract negotiation. Ryan explains to the union that if they will accept flexible work rules, the employees can have more fulfilling jobs, the company will save money which it can spend on benefits, and the union will start with a positive relationship with the company. The union representative says "No way. We go on strike in ten days." A) Tammy B) Ramonia C) Ryan D) Tegau
The books need to be closed in order to prepare the accounts for the next period's transactions
Indicate whether the statement is true or false