Not True:
Mergers and
Acquisitions
Tax Services
Past losses, future gains
Tax attributes such as net operating losses and
built-in losses (assets with a tax basis higher
than value) can provide a tax shield against
future taxable income.
Whether you are a strategic or financial buyer,
protecting and maximizing the value of those
NOLs is a key consideration in the economics
of any transaction. Even if you don’t plan on
utilizing NOLs currently, your ability to utilize the
tax benefits of an NOL is an important part of
financial reporting, and your failure to properly
determine the benefit could result in negative
financial statement consequences.
If you are acquiring a company with NOLs, annual
utilization of that company’s NOLs is generally
limited to the value of the loss corporation
multiplied by the adjusted federal long-term
tax-exempt rate. But the analysis does not
stop there.
Having a full understanding of a company’s status
as a Net Unrealized Built-in Gain (NUBIG) or Net
Unrealized Built-in Loss (NUBIL) corporation is
critical. The annual utilization of NOLs can be
increased significantly if the acquired company
is a NUBIG corporation. But, if the company is a
NUBIL corporation, even post-ownership change
losses may be treated as if they were recognized
prior to the ownership change, thereby further
limiting the ability to utilize NOLs.
