Transaction Services

An accurate calculation of stock basis (SB) and earnings and profits (E&P) is an essential element in making informed decisions for companies involved in structural change (e.g., disposition, merger, liquidation, spin-off or extraordinary distribution).

The benefits of having accurate E&P calculation include timely tax information to aid in business decisions, reduce financial risk and tax exposure, and a reduced likelihood of unexpected tax consequences.

How we can help:

• Calculate accurate SB and E&P;
• Determine the consequences of the loss disallowance rule application;
• Review of SB and E&P computations prepared by clients or their outside service providers;
• Run real-time scenarios to determine which legal entity or entities to sell;
• Avoid unintended consequences such as losing high stock basis, triggering excess losses or deferred inter-company gains and creating a gain rather than a loss; and
• Ability to run state-specific scenarios based on conformity/non-conformity with federal rules.

Companies with NOL carryforwards should be aware that Section 382 limits a corporation’s ability to use its tax NOLs following an "ownership change." Section 382 applies to all corporations with NOLs and/or tax credit carryforwards. Companies with significant equity activity may unknowingly experience ownership changes.

PwC’s 382 team works to determine whether or not your company has undergone an “ownership change” in light of a transaction, triggering the application of Section 382, and if so, the impact of that change on your company’s ability to utilize its losses to offset future income.

How we can help:

• Assist in performing a high-level feasibility analysis to ascertain whether a more in-depth analysis is appropriate, specifically with regards to the recent proposed Treasury Regulations regarding NUBIG;
• Perform an in-depth Section 382 analysis to determine whether an ownership change has occurred and determine applicable Section 382 limitations;
• Review any Section 382 analyses or documentation prepared by clients or their outside service providers; and
• Identify opportunities to either increase any resulting Section 382 limitation through items such as determination of built-in gains, or minimize the potential impact of reductions in value for purposes of Section 382.