For the past 20 years,
Robert Willens has been a tax and accounting specialist at Lehman Brothers Inc.On Monday, Willens launches an independent consulting firm for investors, called Robert Willens LLC.
Willens has also been a long-time contributor to The Deal. Today, he weighed on the structure of the Bank of America/Countryside merger. Willens highlights the benefits of Countrywide's troubles for BofA:
Countrywide, of course, has losses in its
assets which have yet to be "cashed-in" for tax purposes. These losses
are valuable commodities because, assuming no limitations on their use,
each dollar of loss can offset a dollar of otherwise taxable income
saving the beneficiary some $0.35 in tax.
However, as Willens points out, there are limitations to how much BofA can benefit from Countrywide's status:
almost certainly, C is a "loss
corporation"; a corporation which possesses "net unrealized built-in
losses" (NUBILS). The rules which inhibit "trafficking" in tax losses
are found in Sec. 382 of the tax code. Thus, Sec. 382(a) is activated
in cases where a loss corporation undergoes an ownership change. Here,
the business combination, however it winds up being structured, will
give rise to an ownership change because the existing B shareholders
will end up with ownership of well in excess of 50 percent of the stock
of the combined entity. Read the complete column on TheDeal.com
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