When a company has a Section 382 ownership change, its pre-change NOLs are subject to an annual limitation — the Section 382 Limitation. The Section 382 Limitation is calculated by multiplying the value of the old loss corporation by the applicable long-term tax-exempt rate for the month of the ownership change. For November 2016, the applicable long-term tax-exempt rate is 1.54%.
The long-term tax-exempt rate is the highest of the adjusted federal long-term rates in effect for any month in the 3-calendar-month period ending with the calendar month in which the change date occurs.
Here is a quick example of how the Section 382 Limitation would be calculated for a company that has an ownership change in DECEMBER 2016:
In this example, let’s assume the company’s value is $11,329,154. Generally, the value of the loss corporation is the fair market value of the stock, including stock described in IRC Section 1504(a)(4), determined immediately prior to the ownership change.