Ownership Change – December 2016

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ownership change december 2016When 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.

IRS AFR DEC 2016

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