BATTLE MOUNTAIN GOLD INC V.MMR

Question on Tax Pool Sales

[jsnfernley]

I haven't seen this topic come up for so long anywhere.

Canadian companies used to be able to sell their tax pools, or losses, to another Canadian company under certain circumstances.  Let's say company ABC had $39m in tax losses.  These losses could be used to offset future income and reduce income tax liability.  Say the federal tax rates were 33%, in essence company ABC had $13m in saved cash flow potential if they ever had any profit, as 33% of $39m would be the taxes they would pay to Revenue Canada for federal taxes.

If these could be sold they would be sold at a discount, as no self respecting vulture would have any reason to pay full price.  It's a question of at what price and what level of discount for providing cash to someone who needs it and has something you want and can use.

Madison has written off about $44m invested in Mt. Kare for book purposes.

Since it was an Indonesian corporate subsidiary, could they take the tax losses against Canadian income, or sell the tax pools to another Canadian company to take against Canadian income?  Would they have to wait until they no longer retained any interest in the property?

Does the purchasing company have to take as income the difference between the amount they purchased and what they paid?

Any help on this topic would be appreciated.

My thinking is that Madison has only one real end game, selling to Newmont, based on the Lewis property only.  Selling stock is one way to raise money, tax loss pools may be another.