Jim owned 100% of the Rockford Files Corporation (RF). At the end of last year, RFhad an

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Question:

Jim owned 100% of the Rockford Files Corporation (RF). At the end of last year, RFhad an NOL of $6,000,000. On January 1 of the current year, Jim sold all of his stock
in RF to David for $8,000,000. For January of the current year, the long-term tax-exempt rate was 3%. At the time of the sale, RF only had one asset with a basis thatwas significantly different from its fair market value: a trailer in Malibu (used as anoffice) with a value of $1,000,000 and a basis of $200,000. (Ignore recapture issues).
This year, RF sold the trailer for $1,000,000 and realized $5,000,000 of taxableincome before considering any NOL carryovers. (The $5,000,000 includes the gainon the sale of the trailer.) [Note: It DOES NOT MATTER whether the NOLs wereincurred pre- or post-TCJA.; the answer will be the same under both approachesbased on the numbers in this problem.] What is RF's taxable income for thecurrent year after taking the NOL carryover into account? Enter as a positivenumber.