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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsBailed Out AIG Posts Huge "Beat" On Tax Gimmick, Will Avoid Paying Taxes For Years
by Tyler Durden on 02/23/2012 16:41
AIG just conducted a two-fold master class of i) how to confuse Wall Street of having "superb" earnings, and ii) how to avoid paying any corporate taxes for years to come. Because as part of the company's just announced massive $19.8 billion profit, a whopping $17.8 billion was nothing short of the oldest tax accounting gimmick in the book - the release of a valuation allowance (i.e., deferred tax liability vs deferred tax asset conversion). In other words, apples to apples, the real Net Income attributable to shareholders was not $19.8 billion but realistically $2 billion, which would compare to last year's $11.2 billion if only it was not for a $13.5 billion gain on divested business posted in Q4 2011, when the company again was fudging numbers like a drunken sailor. Anyway, we are confident even the algos will figure it out eventually. But the real slap in the face coming from this bailed out company is that as a result of this accounting change, AIG will essentially not pay any taxes for years to come, most likely until its next insolvency.
Reuters explains: "Bailed-out insurer American International Group reported a profit of $19.8 billion for the fourth quarter, after an accounting determination that it is likely to post future profits let it release the value of some tax benefits. The move essentially means AIG will not pay tax on tens of billions of dollars of income in the coming years, thanks to benefits that stem from its financial crisis-era losses." In other words, the company that is still primarily held by the Treasury, i.e., America's taxpayers, has just repaid its generous bailout provider by halting all tax payments on future profits, courtesy of some bespectacled tax accountant in some dark room agreeing that AIG can now use its NOL carryforward in perpetuity, as the firm is now "viable."
And that is how corporate cronysim thrives in what what is without a doubt the world's most laughable banana republic (after Bavaria Sachs of course).
From Reuters:
Having determined it is more likely than not to be consistently profitable in the future, it released most of the allowance in the quarter.
Some of the allowance, related to the company's life insurance business, was not released, a recognition that future profits are not as immediately certain there.
And from the company itself:
But at least the stock is up mildly in the after hours. We dare not even ask how many Italian bonds the insurer was long in the past quarter, and avoided to take marks on courtesy of MTM still being dead in the abovementioned banana republic.
http://digg.com/newsbar/topnews/bailed_out_aig_posts_huge_beat_on_tax_gimmick_will_avoid_paying_taxes_for_years
pansypoo53219
(21,010 posts)so he can end loopholes. and make all businesses pay taxes.
mike_c
(36,281 posts)Obama can close loopholes without handing out further tax benefits to the most profitable corporations in the U.S. Another interpretation that's just as viable as yours: Obama is closing some loopholes to provide cover for still more giveaways for corporations.