Estimate the sufficient taxable income, Corporate Finance

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L has business assets worth $8 million and NOL carryovers of $1 million expiring in 14 years and of $2 million expiring in 15 years. 100% of L's stock is worth $10 million. The long-term tax exempt rate is 8 percent. The current third party market interest rate is 10 percent. Commercial bank mortgage rates are 12%.

(a) What will the § 382 limitation be if an ownership change occurs with respect to L's stock? Assuming sufficient taxable income, how long will it take to fully utilize the NOLs?

(b) Same questions and facts as (a) above, except L has minimal assets and 100% of its stock is worth $1 million.

 


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