Gray Corporation had net assets with a fair market value of $4 million and an NOL carryforward of $3.0 million.Last year, Gray's shareholders received 40% of Sunset stock in a transaction qualifying as a reorganization.The long-term tax-exempt rate at that time was 9%.What is the maximum amount of Gray's NOL available to offset Sunset's $2,000,000 income for the current year?

Question

Quizplus · Accepted Answer

The maximum amount of Gray's NOL that can be used to offset Sunset's income is determined by the Section 382 limitation, which is calculated as the fair market value of Gray's net assets ($4 million) multiplied by the long-term tax-exempt rate (9%). This results in a limitation of $360,000.

Gray Corporation Had Net Assets with a Fair Market Value