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(You may use two pages to answer questions (h), (i) and (j) below). The Davis Corporation,...

(You may use two pages to answer questions (h), (i) and (j) below).

The Davis Corporation, a calendar year corporation, acquires all of the stock of Teledent Corporation, a calendar year corporation, in a "B" reorganization for $600,000 worth of its voting common stock. After the transaction, the former shareholders of Teledent own 20% of the outstanding Davis stock. Teledent has net operating loss carryovers of $1,000,000.

(h)     Assume a 5% "long term tax exempt rate." What is the Sec. 382 limitation? Explain your answer.

         (i)      Assume that only 40% of the Sec. 382 Limitation is used in the following year. What happens to the excess?

         (j)      Assume that Teledent has a Net Unrealized Built In Gain of $200,000. In the next year after its acquisition, $40,000 of the NUBIG is recognized. Does this affect the Sec. 382 Limitation?

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