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.

---

Definitions:

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity.

Balance Sheet

A financial statement that provides a snapshot of a company’s financial position, showing assets, liabilities, and shareholders' equity at a specific point in time.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, indicating the net profit or loss.

Owner's Equity

Owner's equity represents the owner's claim to the assets of a business after all liabilities have been subtracted.