• Aug 4th 2009 at 8:27AM
  • 55
Due to what appears to be a slight (additional) bending of the rules, the "new," post-bankruptcy General Motors has been allowed to carry the $16 billion net operating loss that was created by the "old" GM. That means that New GM will not have to pay taxes on its profits for a while, because the profits can be written off by the losses.

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]

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    • 1 Second Ago
      • 6 Years Ago
      Ford got a $6B handout (a loan) this year with a promise of more to come. So GM saving the tax on $16B, while still silly, doens't exactly unlevel the playing field.

      I personally would thing the $30B+ (something like that, right?) that GM was loaned before the bankruptcy and now will never repay would be a bigger concern.
      • 6 Years Ago
      AB just had to wake the trolls.
      • 6 Years Ago
      GM now stand for "Government Made"

      • 6 Years Ago
      To the people who think Ford got screwed here, you need to remember that Ford has lots and lots of past losses that they can continue to "carry forward" when they start generating profits in the future.
      • 6 Years Ago
      Poor Ford.
      • 6 Years Ago
      Fritz is such a dumbass. He is holding up the wrong finger to the taxpayers.
      • 6 Years Ago
      Step 1) You cut a hole in the box...
      Step 2) You put old GM in the box...
      Step 3) You save taxes on your earnings...

      ...and that's the way you do it!

      It's Old GM in a box... ooooooooohh
      • 6 Years Ago
      This is good, I love it. America is changing people, sooner or later the death and destruction of American auto industry will come.

      This is what I call real change, and no I am not mocking Obama even though I don't like him.

      Decades ago, stupid liberals freaked out that robotic arms were going to replace human workers in the auto plant. With the demise of American auto industry, it is going to be a gain for another new & proud American industry, and lets hope it won't be unionized!
      • 6 Years Ago
      Unbeliv...no, wait. Actually it IS believable.
      • 6 Years Ago
      The government taxes its employees and needs to tax its businesses. Its simply unfair to any competition. The government is simply ignoring that competition exists.
      • 6 Years Ago
      On one hand its unfair but on the other hand it is bankruptcy laws, it is what it is....Ford is freely if they choose to go into bankruptcy if they wanted to and get some of the "benefits" loop holes from it....
      • 6 Years Ago
      I hate the "we own GM, so anytime they get an unfair advantage it's to our benefit" frame of mind. If that's the case, why doesn't Uncle Sam buy every company in the U.S., and let them all stop payin' taxes.

      I'll see it as my benefit when I get a check from GM with my portion of their bailout back.
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