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:

Hypothalamus

A section of the brain responsible for hormone production and regulation of essential bodily functions, including temperature, mood, and hunger.

Cerebellum

A part of the brain located at the back and lower part of the skull, essential for coordination, precision, and accurate timing of movements.

Thalamus

A structure in the brain that acts as a relay station for sensory information, directing messages to the sensory receiving areas in the cortex and elsewhere.

Occipital Lobe

The occipital lobe is a region of the brain located at the back of the cerebral cortex, responsible for visual processing.