7. [10%] You're still working for the top CPA/tax consulting firm mentioned in question 1. You hear from another client (also a mid-cap, but growing C corporation). This company is also doing well. This client is also planning to acquire a Target (which we'll refer to as Target III). It is planned that this client will acquire Target III through an IRC &368(a)(1)(B) stock for stock reorganization. The legacy shareholders of Target III received stock of Acquirer worth $60M. If relevant, assume the IRS long-term taxexempt rate at the time of the acquisition =1.5%. The CFO of this client (who does not have a tax background) is particularly excited about one aspect (or one tax attribute) of Target III. He is excited because Target III has an IRC 172 net operating loss of carryover of $80M. Given the profitability of the Acquirer the CFO believes the company will save (at the current federal and state income tax rates [an effective tax rate =25%] ) approximately (a)20M in taxes over the next two years. The CFO is viewing this as an added benefit to the acquisition. 7a.) Is the CFO correct to be viewing the Target's NOLC/O in this way? 7b.) If the CFO is incorrect, briefly explain why the CFO is incorrect