Section 382 Study

The amount of the nol limitation is not known until and unless a 382 study is done.

Section 382 study. Section 382 is designed to prevent a company from being acquired solely for the use of tax benefits and looks to the substance of the transaction. Tax director real estate company i don t know where we would be without this product. Ask management to provide copies of any prior section 382 studies.

There are several reasons a company may be asked to do a section 382 study. A study may also be necessary for a company considering an initial public offering ipo of its stock. Congress enacted section 382 to prevent a corporation with a large taxable income from purchasing a company with net operating losses nol carryforwards and using those acquired nols to offset income.

A loss corporation is a firm that can use tax attributes such as net operating loss nol to deduct their taxable income. In the event of an acquisition the buyer s due diligence team may request a 382 study to validate the quality of the target corporation s nols. As a summary c corporations are those under us law that are taxed separately from their owners.

The section 382 anolyzer has proven to be an excellent and reliable solution for all of our needs from updating our analysis each quarter to doing modeling scenarios for capital raise transactions. If this is the company s initial section 382 study confirm the date that it first became a loss corporation. The most common reasons include.

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. Under section 382 of the irc a c corporation is required to have a limit to offset historic losses. It does this by establishing limitations on the tax benefits for losses that a loss corporation can take following a change in ownership.

This will be the start of the analysis period. Provisions of this section apply when there is a change in the ownership of a c corporation with accumulated nol carryforwards. Identify the transactions that qualify as an equity structure shift or an owner shift.