In 2020 Jacob retired as the managing director and only shareholder of his company, Jacob’s Fine Foods Pty Ltd. In that year he sold his shareholding in the company to his daughter Penny for $1 and Penny took over the running of the business. The business had carry forward losses of $2million dating back five years. In the first year of running the business Penny actively marketed the products of the business and expanded the customer list and made efficiency cuts to the business expenses. Penny did not change the nature of the business which has always been providing fine foods to specialty delicatessens and restaurants. Penny was so successful that the business made a profit in 2021 of $2.5 million.

Required:

 Advise Penny as to the deductibility of the $2 million in carry forward losses.