Oncolytics Biotech Inc T.ONC

RE:RE:RE:RE:ONCY accumulated deficit (Tax losses applied to a buyout)

[Noteable]

During a merger-acquisition transaction, the acquired company frequently accumulated tax losses (accumulated deficit) representing potential tax savings that the acquiring company could use if it obtained the transfer thereof. 

https://us.sagepub.com/sites/default/files/upm-assets/5004_book_item_5004.pdf

On a liquidation of an acquired company or the amalgamation of the acquired company with its parent, the pre-acquisition non-capital losses are deductible by the parent but only against income from the business of the acquired corporation in which the losses arose or from a similar business, which means that an acquiring company of ONCY's oncology business would also have to be in the oncology business in order to transfer 100% of ONCY's accumulated deficit over to their balance sheet. And since a Big Pharma company has profits far in excess of ONCY's accumulated deficit, the following (below referenced) Loss Carryforward provisions do not apply.

This notwithstanding ONCY's accumulated deficit has an inherent value of approximately US$5 per share on an M&A - take-over price valuation.

https://kpmg.com/xx/en/home/insights/2021/03/canada-taxation-of-cross-border-mergers-and-acquisitions.html

How Many Years Can a Loss Be Carried Forward?

A business can carry a loss forward over 20 years, with a carryover limit of 80% of each subsequent year's net income.

 

How Much Loss Can You Write Off in a Loss Carryforward?

A company can write off 80% of each subsequent year's net income in a loss carryforward. In this way, if a company lost $10 million in one year and earned $12 million the following year, it can carryover $9.6 million on the balance sheet in the second year. This is then indicated as a deferred tax asset, and is represented as an expense on the income statement. The benefit is that it lowers the taxable income in the second year to $2.4 million.

https://www.investopedia.com/terms/l/losscarryforward.asp