Heart Corporation Has Net Assets Valued at $1 Million and an NOL

question 118

Multiple Choice

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 3% and Brain's discount factor is 7%, what is the maximum amount that Brain can use of Heart's NOL this year?

• A) $12,500
• B) $30,000
• C) $100,000
• D) $250,000

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Definitions:

Organic Matter

Material derived from the decay of plants and animals that provides nutrients for plants and increases soil fertility.

Topsoil

The uppermost layer of soil, rich in organic matter and nutrients, critical for plant growth and agriculture.

A Soil Horizon

A Soil Horizon is a distinct layer parallel to the soil surface, differing from adjacent soil layers in physical, chemical, and biological properties, composition, or color.

Common Name

A name that is commonly used by the general public to identify a species, as opposed to its scientific name.