All GLG News Analyses Filed Under: Tax Issues

Analyzing Deferred Taxes for Warning Signals and Red Flags

November 12, 2007

Analysis by: GLG Expert Contributor

Analysis of:12/31/06 10-K for General Motors (GM) | www.sec.gov

General Motors (GM) made headlines last week when the company announced a large $39 billion charge to establish a full valuation allowance for its deferred tax assets in the U.S., as well as Canada and Germany. Given the considerable attention by the media and multiple questions I’ve received regarding GM’s charge, I thought it would be timely to write about some key risks within the area of deferred taxes that are common across a broad base of companies.  Included in the "Analysis" section below is recommended steps on how to analyze deferred taxes for these specific risks.

Thomas KleinManaging MemberKleinCPA PLLC

Investors Punish GM Stock, in Part on Large Deferred Tax Adjustment.

November 7, 2007

Analysis of:GM Posts Huge Loss | online.wsj.com

Investors fled General Motors following the release of its Q3 results.  The reported loss for the quarter was $38.96 billion of which 99% of the loss ($38.6 billion) resulted from the write-down of deferred tax assets.  Have investors overreacted to the noncash charge or is the decline in market value justified?

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Certain Tax Implications for US Companies Doing Business in India - Transfer Pricing

November 1, 2007

Analysis of:Tax Relief for Firms Engaged in Trade with US | www.business-standard.com

The  plethora  of  Double Tax  Avoidance Treaties (DTAA) which  the  US  has  with  various countries  are  meant to  lubricate the wheels of  international commerce  for  US  Companies. The Indian government has now decided  to  extend the  benefits of  the  DTAA  which  India  has  with  the  US  to  Indian companies doing  business with  the  US. This  will  have  major  beneficial  implications  for  US  companies  doing  business  in  India which  I  examine  in  this  analysis.

IRS “Dragnet” Must Now Be Based On “Just The Facts"

October 29, 2007

Analysis by: GLG Expert Contributor

Analysis of:IRS Is Denied Work Papers Of Textron in Pivotal Case | online.wsj.com

In the pivotal Textron case[1]the court held that requested tax accrual workpapers are protected by the work product privilege and are therefore not discoverable by the IRS in their audits due their “non-factual” status. As a result, any IRS "dragnet" must be based on "just the facts" as the court succinctly stated: "The determination of any tax owed by Textron must be based on factual information, none of which is contained in the workpapers ..." Textron p. 33 [1]District Court for Rhode Island in United States v. Textron Inc. and Subsidiaries, D R.I. No. 06-198T, Aug. 29, 2007

Increasing “Buzz” Relating to FIN 48 and Potential “Higher-Risk” Companies

September 12, 2007

Analysis by: GLG Expert Contributor

Analysis of:The Uncertainty Principles | www.cfo.com

The increased disclosures required by FIN 48 are clearly uncovering some notable “red flags” and could potentially result in material cash ramifications for certain companies. As a result, I believe the new standard is an important one for investors to understand and assess for potential risks on companies of interest. When considering the increased “buzz” surrounding FIN 48 created by recent articles published in the financial press, I thought it would be helpful to give my perspective on which types of companies may be at “higher-risk” of being materially impacted by FIN 48 (which is discussed in the Analysis section below).

FIN 48 Exposes Notable Red Flags for Certain Companies

September 12, 2007

Analysis by: GLG Expert Contributor

Analysis of:How Accounting Rule Led to Probe | online.wsj.com

A recent article in the WSJ discusses that a subcommittee of the U.S. Senate is probing at least 30 companies regarding past tax-cutting transactions – with the author commenting the investigation appears to have been sparked by the new accounting rule known as FIN 48. Three companies are specifically identified to have received letters – Merck & Co. (MRK), Johnson & Johnson (JNJ) and Wyeth (WYE). The increased disclosures required by FIN 48 is clearly uncovering some notable “red flags” and could potentially result in material cash ramifications for certain companies. Although FIN 48 was primarily intended to incrementally inform investors on a company’s tax situation, the required increased disclosure is essentially resulting in “low-hanging fruit” for government taxing authorities. It is guiding them to certain companies that may have been overly aggressive in taking material levels of questionable tax deductions in the past.

PE Firms Unfair Tax Treatment

September 4, 2007

Analysis by: GLG Expert Contributor

Analysis of:Fear of Taxation by Association | online.wsj.com

PE Firms are under scrutiny for a barrage of reasons.  Now, Congress is reviewing how the entities are taxed.  Many feel that PE firms have an unfair advantage by being taxed at the 15% long-term tax rates used for investments, which is unfair since the fees generated are short-term in nature and are determined by the PE firm rather than the company receiving the investment. For WSJ article, please read: http://online.wsj.com/public/article/SB118411051694462654.html

Jose TrevinoPrincipalAmeriCompass

Can we expect reforms to the Mexican fiscal reform?

July 17, 2007

Analysis of:Rechaza Hacienda bajar tasa de la CETU | www.eluniversal.com.mx

One month after the new fiscal reform was submitted to Congress, the debate has centered on changes to the flat tax (CETU) that will eventually substitute the revenue-based tax regime. Business organizations are lobbying to reduce the CETU from 19 percent to 12 percent. Ironically, the key to the final outcome may lay in the hands of PRI senators.

equal treatment for all companies

July 17, 2007

Analysis by: GLG Expert Contributor

Analysis of:Fear of Taxation by Association | online.wsj.com

The actual situation of the M&A market becomes more and more diffiuclt for industrial players as the advantages and term investment of PE firms are completly disconnected from the reality. Based on their actual tax rate the PE firm can pay more betting on the selling price Financial stability is questionable as they have more and more recourse to bullet debt, everybody knowing that the target cannot pay the leverage increased tax rate will force them to change strategy and also think to make money through dividends paid by the target instead of only profit on sale We will gain consider stratégic investment and indusctrial strategy

PWC, scapecoat of Russia political agenda.

July 13, 2007

Analysis by: GLG Expert Contributor

Analysis of:Russian court hands victory to PricewaterhouseCoopers in tax evasion case | www.iht.com

PWC, a international audit firm shouldn't be that easy falling into tax evation. Moscow's higher Arbitration Court  give foreign firms confidence to stay in Russia. Russia government in the background to nationalised the oil business.

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