Acquiring Corporation Is 100%-Owned by Peter Hart

question 70

Multiple Choice

Acquiring Corporation is 100%-owned by Peter Hart. Target Corporation is 100% owned by Dick Weber. The two individuals are not related. Target Corporation has $400,000 of NOL carryovers at the time Acquiring Corporation is considering making a cash acquisition of part or all of Target Corporation's stock. What is the maximum amount of Target stock that can be acquired in a single transaction without the Sec. 382 loss limitation rules applying to the NOLs?

• A)49%
• B)50%
• C)80%
• D)Any acquisition of Target stock will cause the Sec. 382 loss limitation to apply.

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Definitions:

Business Transactions

Acts of trading or dealing involving the exchange of goods, services, or financial assets between two or more parties.

MICR Recording Area

A section on checks encoded with magnetic ink character recognition technology to facilitate the electronic processing of bank checks.

Routing Number

A nine-digit code used in the United States to identify a financial institution in a transaction.

ABA Number

A fraction appearing in the upper-right corner of all printed checks that identifies the geographic area and specific bank on which the check is drawn.