Through a \"Type A\" reorganization, Yellow Corporation acquired 100% of SunCo s

Question

Through a "Type A" reorganization, Yellow Corporation acquired 100% of SunCo stock by September 25 of the current tax year ending December 31. At the time the 100% was acquired, SunCo was worth $900,000, and the Federal long-term tax-exempt rate was 4%. SunCo holds capital loss carryovers of $25,000. Assume that the § 382 limitation for the current year is $100,000. Yellow reports taxable income of $200,000 which includes $30,000 capital gains. At the time it was acquired, SunCo had taxable income of $32,000 which included $4,000 capital gains. If an amount is zero, enter "0". Enter the correct amount for each the following:

How much of the SunCo capital loss carryover may Yellow use in the current year to offset its income? $--------

How much of SunCo capital loss carryover may SunCo use in the current year to offset its income? $---------

Explanation / Answer

Market value can fluctuate a great deal over periods of time and is substantially influenced by the business cycle. Market values plunge during the bear markets that accompany recessions and rise during the bull markets that happen during economic expansions.

Market value is also dependent on numerous other factors, such as the sector in which the company operates, its profitability, debt load and the broad market environment. For example, Company X and Company B may both have $100 million in annual sales, but if X is a fast-growing technology firm while B is a stodgy retailer, X’s market value will generally be significantly higher than that of Company B.

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