Heart Corporation Has Net Assets Valued at $1 Million and an NOL

Multiple Choice

Heart Corporation has net assets valued at $1 million and an NOL of $250,000. On December 31 of last year, Heart is acquired by Brain Corporation, a calendar year taxpayer, in a restructuring qualifying as a tax-free reorganization. Heart shareholders receive 45% of Brain's shares in exchange for all of the Heart stock. Assuming that the Federal long-term tax-exempt rate is 5% and Brain's discount factor is 10%, what is the maximum amount that Brain can use of Heart's NOL this year?

A) $12,500
B) $50,000
C) $100,000
D) $250,000
E) None of the above