VanDeKamp Holdings operates two separate lines of business - a catering business and a cookbook publishing business. During the year ended December 31, 2020, the company lost $300,000 from the catering business and earned a profit of $100,000 from the cookbook publishing business. The $200,000 non-capital loss could not be carried back, and as a result it was carried forward. On January 1, 2021, VanDeKamp Holdings is acquired by another company. During the 2021 year, the catering business lost another $150,000 while the cookbook publishing business earned $350,000. What portion of the loss carry forward can be deducted in the 2021 fiscal year?

Question

Quizplus · Accepted Answer

When a company is acquired, the ability to use loss carryforwards is often restricted to prevent tax avoidance. In this case, the acquisition likely limits the use of the loss carryforward, so none of the $200,000 loss can be deducted in 2021.

VanDeKamp Holdings Operates Two Separate Lines of Business - a Catering