Replies to post #147426 on NeoMedia Technologies, Inc (NEOM)

[bleedingedge]

Net Operating Losses

If the Buyer purchases a company's stock, that company's tax attributes are retained. There are special considerations when the target company has net operating loss carryforwards. The tax code does put a limitation on the amount of the carryforward and generally those carryforwards are canceled if the business of the company is discontinued during the first two years following a change in ownership. Typically the NOLs and certain built-in losses of an acquired company can only be used to offset future income of that company, not taxable income of other businesses of the Buyer that are included in the Buyer's consolidated return. However, if the acquired company continues to have losses, the buyer may file a consolidated tax return and may offset current losses against current profits.

Generally, the Section 382 limitation is calculated by multiplying the total value of the company by the tax-exempt long-term bond rate at the ownership change. In some instances, the time is takes to take advantage of the loss carryforwards makes sense. In some instances, it's not worth the effort.