Lehman Brothers Financial SA (LEHNQ)

[stoxjock]

This is why CTs are GOLD!!!

=================================================================
From another board, courtesy: tanjazielman:

=================================================================

tanjazielman Tuesday, 10/18/16 09:52:42 PM
Re: None
Post #
465367
of 465416 Go
remember this one?

"IRS private letter ruling 2012280233"

It disappeared from the IRS Website. You can't find it when you google it anymore. Strange huh? But it was released for WMIH/WMILT/WMIIC, and this is the only thing I could find about it:

Quote:
IRS released PLR 2012280233 concerning the federal income tax consequences of the liquidation of a consolidated group (“Taxpayer Group”). Taxpayer Group had a consolidated NOL and subsequently, Taxpayer and several of its affiliates (“Debt- ors”) filed for Chapter 11 bankruptcy. Under the final bankrupt- cy plan (“Plan”), a plan trust was created and all of Taxpayer’s stock was cancelled. The plan trust provided for the issuance of one share to be issued and held for the benefit of each former shareholder consistent with their former entitlements. After the Plan’s effective date, Taxpayer, as the plan administrator, was to wind down and liquidate Debtor assets. Though unlikely, the Plan preserved the Taxpayer’s shareholders’ right to receive a distribution in proportion to their previous stockholdings. The Debtors will ultimately be dissolved.
The IRS ruled that, under Section 382(g), there was no owner shift where the stock held in the plan trust stock replaced Taxpayer’s stock. Further, claims retained and interests received by the Debtors’ creditors are not “stock” for purposes of Section 382.4
Section 382(l)(5)(A) is an exception to the Section 382 limita- tion on using NOLs and applies where a loss corporation is under jurisdiction of a court in a “title 11 or similar case” and when the loss corporation’s shareholders and “qualified creditors” (as a result of their status as shareholders and qualified creditors) after the ownership change own at least 50 percent of the loss corporation’s stock (measured by both voting power and value).
Although Section 382(l)(5)(A) preserves the use of NOLs after an ownership change, there are several significant drawbacks. First, the pre-change losses and excess credits are recalculated
as if no deduction was permitted for interest paid or accrued by the old loss corporation on debt that was converted into stock under a title 11 case for the part-year in which the change occurs and the three prior years.5 Second, usually when determiningcancellation of indebtedness income, where corporations transfer endnotes stock to creditors to satisfy the debt, the corporation is treated as satisfying the debt to the extent of the stock’s fair market value. However, where the Section 382(l)(5) bankruptcy excep- tion applies, the corporation does not account for indebtedness for interest paid or accrued during the year of change and the three prior years.6 Third, if there is a second ownership change during the following two-year period, the second change does not qualify for the Section 382(l)(5)(A) exception and the Sec- tion 382 limit is zero.7 Last, the stock must be transferred to a creditor in satisfaction of indebtedness, which was either held by the creditor for 18 months before the title 11 proceedings or are ordinary-business-trade creditors.8
PePPeR PeRsPective
The Taxpayer in this PLR seems to have received a unique result because it arguably received the benefits of the Section 382(l)(5) bankruptcy exception without any of the associated drawbacks. Under the PLR, the Taxpayer was allowed to avoid the Section 382 limitation because the IRS found there was no ownership change as a result of the IRS determination that the interests the creditors might receive are not “stock” for Section 382 purposes.
We note that bankruptcy scenarios are typically analyzed under Section 382(l)(5). Here, however, because of the complex litiga- tion present in the Taxpayer’s facts, the nature of the assets held, and the depressed financial markets that the Taxpayer is subject to, it was apparently sufficiently unclear as to the exact inter-
est in the Taxpayer that the creditors were receiving when the Plan was confirmed. Thus, the IRS may have assumed that, since the interest was unclear, no stock was conveyed and therefore, a traditional Section 382(l)(5) analysis was not required.


In essence the above quote states that a gain on previous claims or retained interests (meant for escrows) does not offset NOL's. See US Code paragraph 384:

https://www.law.cornell.edu/uscode/text/26/384"; rel="nofollow" target="_blank" >https://www.law.cornell.edu/uscode/text/26/384[tag]U.S. Code § 384 - Limitation on use of preacquisition losses to offset built-in gains

[/tag]


"one share to be issued and held for the benefit of each former shareholder consistent with their former entitlements." I believe those are our escrows!

And if I interpret this correctly, the beneficial interest therein is consistent with their former entitlements.

Wouldn't that mean maximum of par ($1000 per P, and $25 per K, and U's unlimited) for distribution?

Was the 75/25 split only for the amount of WMIH shares?

Also there is the possibility of claims retained and interests received? Which do not qualify as stock, but beneficial interest of former shareholders consistent with their former entitlement?

Also interesting:

I've read that dissolving a subsidiary can also mean an upstream merger with the holding company (which could be WMIH iin the case of 34 billion remaning MBS Trusts assets).

I've also read something I don't completely comprehend about reincorporation in the same state playing a role of dissolving/liquidation of a subsidiary.

To be continued...

===================================================================