global inc an international cosmetics wholesaler has a history of substantial profit 4519624

Global Inc., an international cosmetics wholesaler, has a history of substantial profits. It is now October 1, 20X6. For its current year ending December 31, 20X6, it projects pretax profit of $7,000,000. Frost Foods Inc. is a distributor of frozen Canadian beef. Frost Foods Inc. was profitable until 20X0. Large losses were incurred in years 20X0 through 20X3. Since then, it has managed to break even. At the beginning of its current taxation year, Frost Foods Inc. had the following unused losses: Global Inc. plans to purchase all of the issued shares of Frost Foods Inc. on November 1, 20X6 and immediately amalgamate Frost Foods Inc. and Global Inc. into one corporation. The plan is to reduce Global Inc.’s taxable income for 20X6 by $875,000 by deducting the losses incurred by Frost Foods Inc. Global Inc. and Frost Foods Inc. are unrelated Canadian corporations. Required: Comment on Global Inc.’s ability to utilize the Frost Foods Inc. losses.

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