Section 382 Summary

Section 382 of the internal revenue code generally requires a corporation to limit the amount of its income in future years that can be offset by historic losses i e net operating loss nol carryforwards and certain built in losses after a corporation has undergone an ownership change.

Section 382 summary. These reorganization transactions however have to meet certain legal requirements to classify for favorable treatment. When an ownership change occurs section 382 limits the use of nols and credits in subsequent periods. In this article we provide an overview of the section 382 limitation and valuation considerations concerning the calculation of the section 382 limitation.

Limitation and ownership change are. 94 455 shall not apply to any increase in percentage points occurring after december 31 1988 and. Section 382 section 382 section 382 defines the allowable deductions a company can make against its taxable income using net operating losses.

Printable versionsend by emailpdf version. An ownership change is defined generally as a greater than 50 change in the ownership of stock among certain 5 shareholders over a three year period sec. Section 382 a of the internal revenue code of 1954 as in effect before the amendment made by subsection a and the amendments made by section 806 of the tax reform act of 1976 section 806 of pub.

Under section 382 of the irc a c corporation is required to have a limit to offset historic losses. 382 to limit the use of corporate nols following an ownership change. 382 an ownership change occurs when the ownership of shareholders owning 5 or more of the loss corporation increases by more than 50 percentage points within a three yearperiod.

In an effort to limit loss trafficking congress enacted sec. Section 382 generally measures an ownership change by looking at cumulative increases over a three year period which means an ownership change can be triggered by rounds of financing that occur during a three year period. As a summary c corporations are those under us law that are taxed separately from their owners.

Section 368 section 368 section 368 outlines a format for tax treatment to reorganizations as described in the internal revenue code irc of 1986. Nol and credit limitations. E a service agent e g consortium third party administrator as defined in 49 cfr 382 107 may prepare the mis report on behalf of an employer.