Section 382 Limitation Rate

Under section 382 b 1 the section 382 limitation for a tax year ending after an ownership change generally equals the product of a the value of the stock of the corporation immediately prior to the ownership change and b the long term tax exempt rate.

Section 382 limitation rate. Section 382 f 1 provides that the long term tax exempt rate shall be the highest of the adjusted federal long term rates in effect for any month in the three calendar month period ending with the calendar month in which the ownership. Limitations of section 382. It is calculated as follows.

C special rules for certain section 338 gains if an election under section 338 is made in connection with an ownership change and the net unrealized built in gain is zero by reason of paragraph 3 b then with respect to such change the section 382 limitation for the post change year in which gain is recognized by reason of such election. There is a formula used in calculating the base limitation amount bla. Bla fair market value of the stock of the loss corporation x federal long term tax exempt rate.

163 j limitation of 150 and incurred current yearbusiness interest expense of 120. Under these circumstances xhas an excess sec. For section 382 purposes a change in ownership occurs when there is a purchase sale or reissuance of equity and there is a 50 percent increase in ownership by 5 percent shareholders during a three year testing period.

163 j limitation of 30 150 limitation minus 120 current yearbusiness interest expense. The fair market value is subject to potential adjustments described in the regulations and the federal long term tax exempt rate is published monthly in the internal revenue bulletin. In some circumstances however the tax law creates additional limitations.

Assume an acquirer purchases all the stock of lossco for 100. The section 382 limitation is determined by multiplying the value of the loss corporation s equity before the ownership change by a specified rate that is determined each month by treasury and the irs. When is section 382 applicable.

After the acquisition the new company may deduct its losses in its taxable income subject to the section 382 limitations. Section 382 limitation on net operating loss carryforwards and certain built in losses following ownership change the adjusted applicable federal long term rate is set forth for the month of march 2020. 382 limitation calculated for the ownership change is 80 per year.