GREY:TBTEF - Post by User
Post by
cigarbutt1on Mar 22, 2017 11:00pm
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Post# 26018146
RE:Why do you guys think tax benefits come with shares?
RE:Why do you guys think tax benefits come with shares? Right. Let's go back to business.
Without more substantial evidence. I would tend to think that there is value in the tax pools and that value is tied somehow to the shares (shell) of the company.
Even if Oldfart is right, the valuation exercise is interesting and, at the very least, the value of these assets were incorporated in the purchase price.
Thanks for the link. The article is mostly about non-capital losses. Disclosure versus amount and composition of tax pools for CDN O+G firms is variable. For TBE, disclosure about this stopped (my take) when they started to include a going concern uncertainty note. There was a reassessment (we were reminded of this on August 24th, 2016) for the 2011, 2014, 2015 and 2016 years relating to specific Scientific Research and Experimental Development tax deductions but amounts involved were small in comparison to previously disclosed tax pools amounts. Presumably, these SR&ED tax deductions were a minor portion of the tax pools.
I suggest the following link that has a section on successor corporation rules. This is a very complex topic and I submit that, with present disclosures, it is impossible to tell for sure if the tax pools have been acquired/transferred with the assets or if those tax pools can be transferred/acquired in a separate subsequent transaction. I lean to the latter.
https://www.pwc.com/ca/en/energy-utilities/publications/pwc-oil-gas-taxation-2012-10-en.pdf
I also suggest the following link that was published when perhaps we had sunny ways. Interestingly, what the author sees as a relative weakness for TBE (ie tax shield would not last long versus the low cover ratio), I see as a relative advantage because TBE had a relatively high ratio of tax pools in relation to its enterprise value and had relatively high cash flow torque meaning that under a better pricing environment, the tax shield could be used much more rapidly ie a lower discounting factor for the tax pools.
https://www.pwc.com/ca/en/energy-utilities/publications/pwc-oil-gas-taxation-2012-10-en.pdf
Enough for now.