Mr Cooper Group Inc (COOP)

[fsshon]

Abandoned securities. The final regs provide that for purposes of applying the Code Sec. 165(g) loss characterization rules, the abandonment of a security establishes its worthlessness to the taxpayer. A loss established by the abandonment of a security that is a capital asset is treated as a loss from the sale or exchange, on the last day of the tax year, of a capital asset, unless the Code Sec. 165(g)(3) exception applies. While a taxpayer doesn't have to relinquish legal title to property in all cases to establish abandonment, the regs require that to abandon a security a taxpayer has to permanently surrender and relinquish all rights in the security and receive no consideration in exchange for the security. (Reg. § 1.165-5(i))

Sec 165 (g) (3) WMI did not have to write-off the abandonment of WMB stock in 2008, because it qualified for the exemption clause. In the course of business, WMI garnered over 90% of it daily receipts from WMB and therefore qualified for the exemption that made WMI abandon WMB stock in the taxable year of the loss. So, WMI is able to carry forward the loss of the WMB "worthless securities" as an Ordinary Loss and not a Capital Loss. As time progressed and the years went by, WMI was reorganized into WMIH and Bankruptcy court ordered WMI to abandon all stock in WMB on Day 1 after confirmation of the BK plan. Now that WMI was able to legally abandon WMB stock in Taxable Year of 2012, the resulting loss now classified as "ordinary" and not Capital rolls onto the books of the new corporation. Now as 2012 progresses and WMIH BOD wants to utilize and monetize stated Ordinary Loss, the suitors will need to be merged into WMIH. If WMIH were to be liquidated into a suitor, the IRS may not allow a full Ordinary Loss transfer deduction. If suitor were to buy WMIH as an affiliate, then the rules could govern full transfer of balance sheet. The IRS plays this on a "case by case" basis and during the financial crisis, it was allowing acquisition of thrifts and resulting losses to be transferred.


http://www.irs.gov/irb/2008-16_IRB/ar08.html

http://apps.americanbar.org/buslaw/committees/CL690000pub/newsletter/200807/reinstein.pdf

(Look Thru was performed by the accountants in BK and passed by the BK court)
We are currently governed by Sec 382 rules and need to stay in post-bk ownership to protect all losses. This is why the BOD put out a PR that UZ just posted "again" that states "we did not authorize unsolicited trading of our stock on the pinks!"