DealZone

Taxman gives breaks in taxing times

October 7, 2008

taxbreak.jpegThe taxman is bringing good tidings for U.S. companies this crisis season.

Last week, the IRS relaxed rules at least twice in a bid to help companies access much-needed capital.

Early last week, it made bank takeovers easier by allowing a buyer to take tax breaks on a target’s loan losses immediately instead of having to spread it over many years.

Experts said that could spur deals in the troubled banking sector and may have been one of the reasons behind Wells Fargo’s surprise bid for Wachovia.

The IRS then relaxed another rule, allowing U.S. companies to borrow from their foreign subsidiaries without triggering a 35 percent corporate income tax. That move is aimed at bringing fresh capital into the system.

Of course, the generosity comes at a cost. Stifel Nicolaus analysts estimated that thanks to the tax breaks, the competing bids by Citigroup and Wells Fargo for Wachovia will cost the government the same amount of money — $21 billion.

(Photo credit: Reuters)

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