Present value tables needed for this question. Hard Corporation has net assets valued at $900,000 and an NOL of $450,000.On January 3 of the current year,Hard is acquired by Soft Corporation in a restructuring qualifying as a tax-free reorganization that causes an ownership shift of 80 percentage points for the Hard shareholders.Soft uses a calendar year for tax purposes.Assuming that the long-term tax-exempt rate is 5%,what is the maximum amount Soft should be willing to pay Hard for its NOL,if Soft uses a 10% discount factor for this decision?

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Since there has been more than a 50 percentage point ownership shift,the § 382 limitation applies.The maximum amount of NOL that can be utilized in any one year is $45,000 ($900,000 F1F1F1S1F1F1F10 5%).With an NOL of $450,000,it would take Soft at least 10 years to fully utilize the NOL.The present value of an annuity for 10 years with a 10% discount factor is $276,525 ($45,000 F1F1F1S1F1F1F10 6.145 discount factor).

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