- Aug 4, 2009
REPORT: New GM entitled to $16 billion in federal tax breaks courtesy of Old GM
The issue is that the move, called a "tax-loss carry forward," isn't supposed to be available to the automaker. The tax code contains provisions that prohibit a profitable company from buying an unprofitable company for the sole purpose of claiming the unprofitable company's tax losses – and the type of bankruptcy GM went through should have precluded The General's ability to use the tax loss practice.
Except for the fact that GM was bought by the government, and since the government writes the tax code and collects said taxes, it can decide how it wants to handle the companies it owns. General Motors says the move will bolster its "cash position to the benefit of all parties." Critics, on the other hand, say that GM got a $16 billion unfair head start on Ford. Hat tip to Adrian.
[Source: The Wall Street Journal | Image: Jim Watson/AFP/Getty]