Lehman Brothers Financial SA (LEHNQ)

[Joe Stocks]

You guys really don't understand NOLs, do you.

They are somethings that a company decides to keep or not. They don't go straight to the creditors.

If I am a bondholder and lose $1,000 dollars, on my tax return I can deduct that loss of $1,000 from income. I must report the social security number, or federal tax ID for a corporation, to the IRS when I file my return. This triggers income to the entity that defaulted on the debt. In this case that would be $1,000 income to Lehman. Lehman can offset that income by using a NOL of $1,000. If they don't use the NOL then they must pay tax on the income. In Bankruptcy any debt they default on must be deducted from from the NOLs. That is why Lehman says ALL NOLs will be FULLY utilized basically due to Lehman defaulting on about $125 billion of debt. They say that in their filings. It is a non-cash entry and they have no choice but to offset derived from default of debt with NOL credits.

Lehman does not have cash to pay taxes. The IRS requires that they offset taxes as much as they can with NOLs. The IRS takes the NOLs away. Lehman has no choice but to comply.