Jerk Flashcards
(26 cards)
Why did Seagram record a deferred tax liability on its GAAP financial statements as a result of the DuPont transaction?
Bc the tax basis of the remaining DuPont shares was far less than the GAAP basis of those shares
How did Seagram account for the DuPont transaction on its GAAP statements?
As a sale
As a result of the DuPont transaction, what elements (line items) of Seagrams GAAP financial statements contained amounts that did not coincide with their corresponding economic values?
Deferred tax liability and marketable securities
What benefits did Enron’s MIPS transaction provide for Enron?
Enron’s MIPS was classified as a hybrid between debt and equity of their F/S, but as debt for tax purposes. Enron was able to deduct these payments as interest.
What was Enron’s stated business purpose with its MIPS transaction?
Stated business purpose was to improve debt ratios and reduce the cost of capital
What action did the IRS take with regard to Enron’s transaction?
The IRS decided not to challenge
What did the IRS conclude with regard to Enron’s stated business purpose?
The IRS conceded that there was a valid business purpose bc the transaction lowered Enron’s cost of capital and improved their financial statements (debt/equity ratio and EPS).
Type II
Non deductible IRA
Type IV
Taxable brokerage account
Type VI
Deductible IRA
Non deductible IRA tax rate
Ordinary
Taxable Brokerage account tax rate
Capital gains
Which investment vehicle uses the capital loss carry forward?
Taxable brokerage account
Why did the decision to make or forgo the 338(h)(10) election in the sale of snapple to Triarc have a $250mm+ after tax cash flow effect?
Not making the 338(h)(10) resulted in a $1.4bn loss rather than a gain had it been made. The taxable loss resulted in a refund of prior taxes paid.
If Quaker had spun off snapple, what would have happened to the tax basis that Quaker had in the stock of snapple?
It would have vanished
In the actual sale of snapple to Triarc, why didn’t Quaker oats recognize an income tax benefit for GAAP purposes equal to the full amount of the loss multiplied times the corp tax rate?
Quaker recognized a valuation allowance on the capital loss carry forward.
When Triarc sold snapple to Cadbury, the transaction included a 338(h)(10) election. Why did it make sense in the sale of snapple but not Triarc?
Bc the difference btwn the stock and asset basis was much smaller in the sale to Cadbury than in the sale to Triarc.
How much did Cadbury pay Triarc to make the 338(h)(10)?
About $200mm
Estimate gross tax basis
- Total assets - DTA
- # 1 + DTA/.35
- # 2 - DTL/.35
- # 3 - goodwill*.8
DTA, DTA, DTL - goodwill!!!
Divide, divide, multiply!
2 is add
Estimate net tax basis
- Gross tax basis - total liabilities
2. #1. + DTL
What did RH Donnelley have that made it relatively more valuable than some other firms?
High tax basis in its assets
Approx. how much were the cash tax savings (in discounted) that Bank of America stood to realize from using countrywide’s financial tax losses in the first five years after the acquisition closed?
$500mm
What type of transaction did Citigroup complete to protect its $43bn of DTA?
NOL poison pill
How much, in dollars, were the tax benefits for express scripts in the nextRx transaction?
$800mm to $1.2bn
