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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
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Experience:  10 years experience
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My Name is ***** ***** Michel LeTennier, and I own Atomic

Customer Question

Customer: Hi My Name is ***** ***** Michel LeTennier, and I own Atomic Database Corp , and I am closing it or shelvling ,. ,I have some 900,000$ i NOL.. over the last 3 years.. and was wondering how I can go about selling them or converting them in cash..
JA: Thanks. Can you give me any more details about your issue?
Customer: Company opened in 2011, and I have invested over 900,000$ with no sales
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Customer: a delaware corp
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Submitted: 1 year ago.
Category: Tax
Expert:  MequonCPA replied 1 year ago.

Hi and Welcome to Just Answer -

NOL's cannot be bought or sold. They stay with the corporation that created them. To obtain any monetary benefit would be to sell the corporate stock. However, there is a very limited market for NOL corporations. This is because there are specific rules that apply to NOL use when there is a change in ownership. The use of losses are subject to SRLY (Separate Return Limitation Years) rules. This is a complex area and in general limits the amount of loss that will be allowed in any year after there has been a change in ownership. Thus is would take many years for an acquiring corporation to possibly utilize a substantial portion of the loss carryover. There is no guarantee that the acquiring corporation will utilize all the losses. Because of these limitations, the present monetary value of the NOL is quite low.

The link below is to an article that explains the SRLY rules.

Customer: replied 1 year ago.
I have read all of this and assuming an S corp, one owner. and the new company buys the stock or the whole company?
Expert:  MequonCPA replied 1 year ago.

If this is an S corp the NOL flowed through to you personally at the time it was created. There is no loss in the corporation thus there is no NOL to sell. You personally have or will reap the "benefits" of theses losses.

Customer: replied 1 year ago.
of it is a C corp?
Expert:  MequonCPA replied 1 year ago.

If is is a C corp and they purchase the stock from you, it will reduce your long term capital loss. Assuming this is Section 1244 stock you will be able to claim $50K of loss as an ordinary loss. The balance of the loss will be subject to the capital loss limitations. You can claim up to $3,000 of capital losses per year in excess of your capital gains. Any excess capital loss is carried forward until death.

Customer: replied 1 year ago.
it is presently a c corp and between last year and this year 900,000$ in losses NOL
is there anyway to monetize this?
Expert:  MequonCPA replied 1 year ago.

Sorry, but my original response applies. The only monitzation will be using the NOL to offset future earning of the corporation. The corporation doesn't need to continue in the same business, but changes to the ownership must be limited.

Customer: replied 1 year ago.
what are limits to change of ownership
Expert:  MequonCPA replied 1 year ago.

Less than 50% and that includes incremental purchases after the time the losses were incurred. Thus if you take in a new shareholder with a 25% interest and then that individual acquires another 25% within 3 years, the SRLY rules will apply.

Customer: replied 1 year ago.
we can sell 49% and the buyer can use the losses moving forward over 20 years on a percentage basis?
Expert:  MequonCPA replied 1 year ago.

You're still the majority owner. The corporation still holds 100% the losses.

Customer: replied 1 year ago.
can the 49% owner use any of the losses?
Expert:  MequonCPA replied 1 year ago.

Again, the losses stay in the corporation. If you have a new 49% owner there may be in influx of cash from that owner. The entity finds a profitable niche. The entity has income that will be tax free until the NOL is depleted. The owner is just that an owner. Ultimately they will get benefits if the company is profitable.

We can go around and around, but monetization of even a small portion of this loss in the near term is difficult at best.

Customer: replied 1 year ago.
got it