Heart Corporation holds net assets valued at $1 million and an NOL of $250,000. On December 31 of last year, Heart is acquired by Brain Corporation, a calendar year taxpayer, in a restructuring qualifying as a tax-free reorganization. Heart shareholders receive 45% of Brain’s shares in exchange for all of the Heart stock. Assuming that the Federal long-term tax-exempt rate is 3% and Brain’s discount factor is 7%, what is the maximum amount that Brain can use of Heart’s NOL this year?
a. $12,500 b. $30,000 c. $100,000 d. $250,000
ANSWER: b