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Explain why Sec. 382 would not be an obstacle to the use of NOL carryovers following an acquisition if the value of the old loss corporation is large relative to its NOL carryovers.

A.

The Sec. 382 annual loss limitation is computed by dividing the FMV of the old loss corporation's stock, immediately before the ownership change, by the long-term tax-exempt federal rate. If the FMV of the loss corporation stock is substantial relative to the size of its NOLs, the limitation probably will not be an obstacle to the use of the NOL carryovers.

B.

The Sec. 382 annual loss limitation is computed by dividing the FMV of the old loss corporation's stock, immediately before the ownership change, by the total NOL. If the FMV of the loss corporation stock is not substantial relative to the size of its NOLs, the limitation probably will not be an obstacle to the use of the NOL carryovers.

C.

The Sec. 382 annual loss limitation is computed by multiplying the FMV of the old loss corporation's stock, immediately before the ownership change, by the long-term tax-exempt federal rate. If the FMV of the loss corporation stock is substantial relative to the size of its NOLs, the limitation probably will not be an obstacle to the use of the NOL carryovers.

D.

The Sec. 382 annual loss limitation is computed by multiplying the FMV of the new corporation's stock, immediately after the ownership change, by the long-term tax-exempt federal rate. If the FMV of the new corporation stock is substantial relative to the size of the NOLs carried over, the limitation is not applicable to the use of the NOL carryovers.

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