Get Announcement 99-100 - Application Of Section 382 In Short Taxable Years And With Respect To

26 U.S. Code § 382 - Limitation on net operating loss carryforwards and certain built-in losses following ownership change. The amount of the taxable income of any new loss corporation for any post-change year which may be offset by pre-change losses shall not exceed the section 382 limitation for such year.

In an effort to limit loss trafficking, Congress enacted Sec. 382 to limit the use of corporate NOLs following an ownership change. An ownership change is defined generally as a greater than 50% change in the ownership of stock among certain 5% shareholders over a three-year period (Sec. 382(g)).

26 U.S. Code § 382 - Limitation on net operating loss carryforwards and certain built-in losses following ownership change. The amount of the taxable income of any new loss corporation for any post-change year which may be offset by pre-change losses shall not exceed the section 382 limitation for such year.

If there is an ownership change, sec. 382(c) requires the new loss corporation8 to continue the business enterprise of the old loss corporation. If the new loss corporation fails this continuity of business enterprise ("COBE") test, then the ifew loss corporation's sec. 382 limitation is severely penalized.

Section 382 of the Internal Revenue Code generally requires a corporation to limit the amount of its income in future years that can be offset by historic losses, i.e., net operating loss (NOL) carryforwards and certain built-in losses, after a corporation has undergone an ownership change.

Section 382 Definition: Section 382 of the U.S. tax code states that an Acquirer in an M&A deal structured as a Stock Purchase may use only a limited amount of the Target's Net Operating Losses (NOLs) to reduce its Taxable Income each year and must write down the remaining NOL balance that will go unused.

Section 382 says that the maximum allowable annual usage of a Target's NOLs equals the Equity Purchase Price * the Maximum of the Past 3 Months' “Adjusted Long-Term Rates.”

section 382, Limitation on net operating loss carryforwards and certain built-in losses following ownership change. IRC section 382 limits a loss corporation's ability to use net operating losses that arose before an ownership change and some built-in losses that existed at the time of the ownership change.