REPORT: New GM entitled to $16 billion in federal tax breaks courtesy of Old GM
#1
REPORT: New GM entitled to $16 billion in federal tax breaks courtesy of Old GM
http://www.autoblog.com/2009/08/04/r...ax-breaks-cou/
Due to what appears to be a slight (additional) bending of the rules, the "new," post-bankruptcy General Motors has been allowed to carry the $16 billion net operating loss that was created by the "old" GM. That means that New GM will not have to pay taxes on its profits for a while, because the profits can be written off by the losses.
The issue is that the move, called a "tax-loss carry forward," isn't supposed to be available to the automaker. The tax code contains provisions that prohibit a profitable company from buying an unprofitable company for the sole purpose of claiming the unprofitable company's tax losses – and the type of bankruptcy GM went through should have precluded The General's ability to use the tax loss practice.
Except for the fact that GM was bought by the government, and since the government writes the tax code and collects said taxes, it can decide how it wants to handle the companies it owns. General Motors says the move will bolster its "cash position to the benefit of all parties." Critics, on the other hand, say that GM got a $16 billion unfair head start on Ford. Hat tip to Adrian.
The issue is that the move, called a "tax-loss carry forward," isn't supposed to be available to the automaker. The tax code contains provisions that prohibit a profitable company from buying an unprofitable company for the sole purpose of claiming the unprofitable company's tax losses – and the type of bankruptcy GM went through should have precluded The General's ability to use the tax loss practice.
Except for the fact that GM was bought by the government, and since the government writes the tax code and collects said taxes, it can decide how it wants to handle the companies it owns. General Motors says the move will bolster its "cash position to the benefit of all parties." Critics, on the other hand, say that GM got a $16 billion unfair head start on Ford. Hat tip to Adrian.
#2
So many established laws have been bent, twisted, and broken, and so many individuals and investors have been screwed in this process it's incredible. As far as I see the only people making out like a bandit here are those still employed by GM (especially union workers), and the government.
#3
Umm, so let me get this straight. For this to apply, the company would have been bought for the sole purpose of claiming the unprofitable company's losses on taxes. Correct me if I am wrong, that was the sole purpose of this whole thing.
#4
Based upon that, it is not surprising at all that the government was allowed to 'buy' the tax loss from the old GM to keep with the new GM.
#5
The whole 363 sale was a farce. Any sane rationale person can clearly see GM went through a reorganization, but the judge let them call it a 363 sale to circumvent the normal reorg process.
Based upon that, it is not surprising at all that the government was allowed to 'buy' the tax loss from the old GM to keep with the new GM.
Based upon that, it is not surprising at all that the government was allowed to 'buy' the tax loss from the old GM to keep with the new GM.
But getting back to the topic at hand, I really don't see how you would expect GM to not take this tax break since the company wasn't purchased to assume losses and not pay taxes.
#6
I don't see how they are making like bandits. They gave back a lot and many people lost jobs. I'm sure the union workers would rather work for GM circa 1999 than 2009. I don't see any real winners other than Camaro fans who get to keep the car they have been waiting so long for in production.
#7
A proposed 363 sale may be objectionable, for example, when aspects of the transaction dictate the terms of the ensuing plan or constrain parties in exercising their confirmation rights, such as by placing restrictions on creditors’ rights to vote on a plan. A 363 sale may also may be objectionable as a sub rosa plan if the sale itself seeks to allocate or dictate the distribution of sale proceeds among different classes of creditors.
But none of those factors is present here. The MPA does not dictate the terms of a plan of reorganization, as it does not attempt to dictate or restructure the rights of the creditors of this estate. It merely brings in value. Creditors will thereafter share in that value pursuant to a chapter 11 plan subject to confirmation by the Court ... The objectors’ real problem is with the decisions of the Purchaser, not with the Debtor, nor with any violation of the Code or caselaw
But getting back to the topic at hand, I really don't see how you would expect GM to not take this tax break since the company wasn't purchased to assume losses and not pay taxes.
- the "new" GM is really the "old" GM and this this tax write off is legal but the 363 sale was illegal as a sub-rosa reorg
- the "new" GM illegally bought this tax write off from the old GM
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