Could the historic deal reached by Dell to acquire EMC for $67 billion unwind if the IRS decides it wants a piece of it? Dell officials are reportedly concerned that the IRS could rule that the transfer of the tracking stock that comes with EMC\u2019s 81 percent stake in VMware could trigger a taxable distribution that would add $9 billion to the bill.<\/p>\n
That\u2019s a worst-case scenario posed by the tech business site Re\/code<\/em>, citing multiple unidentified Dell insiders saying such a scenario is a concern. According to the report, Section 355, a provision of the U.S. tax law, describes circumstances that could trigger a tax upon the transfer of the VMware shares.<\/p>\n \u201cSimply put, the law is intended to prevent corporate spinoffs or share distributions from helping pay for an acquisition, which appears to be what Dell is attempting to do,\u201d \u00a0wrote Re\/code author Arik Hesseldahl. \u00a0\u201cIf the IRS were to rule that the tracking stock qualifies as a taxable distribution of shares as defined in Section 355, it would remove a key plank of Dell\u2019s financing for the transaction. At minimum it would require Dell to borrow more money to pay EMC shareholders for the full value of the company. At worst, sources said, the added tax expense could derail the deal entirely.\u201d<\/p>\n Dell is aware of the risks, he noted, having made note of it in the Oct. 12 merger agreement on file with the SEC, which states: \u201cNeither the Company nor any of its Subsidiaries has been a \u2018controlled corporation\u2019 or a \u2018distributing corporation\u2019 in any distribution occurring during the two-year period ending on the date hereof that was purported or intended to be governed by Section\u00a0355 of the Code.\u201d<\/p>\n Rather because EMC hasn\u2019t assumed any control of VMware over the past two years, the deal should \u201cqualify as an exchange described in Section\u00a0351 of the Code,\u201d according to the merger agreement.<\/p>\n \u201cThis is a valid worry, but not a deal breaker,\u201d FBR Capital Markets analyst Daniel Ives told Reuters<\/em>. \u201cWe see Michael Dell as making sure this deal goes through, even if it takes some deal tweaks along the way.\u201d<\/p>\n Jeffrey Schwartz<\/p>\n","protected":false},"excerpt":{"rendered":" Could the historic deal reached by Dell to acquire EMC for $67 billion unwind if the IRS decides it wants a piece of it? Dell officials are reportedly concerned that the IRS could rule that the transfer of the tracking stock that comes with EMC\u2019s 81 percent stake in VMware could trigger a taxable distribution<\/p>\n","protected":false},"author":2,"featured_media":1721,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[97],"tags":[117,103],"class_list":["post-289","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-apps","tag-cloud"],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/onesolution.vn\/index.php?rest_route=\/wp\/v2\/posts\/289","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/onesolution.vn\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/onesolution.vn\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/onesolution.vn\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/onesolution.vn\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=289"}],"version-history":[{"count":1,"href":"https:\/\/onesolution.vn\/index.php?rest_route=\/wp\/v2\/posts\/289\/revisions"}],"predecessor-version":[{"id":1723,"href":"https:\/\/onesolution.vn\/index.php?rest_route=\/wp\/v2\/posts\/289\/revisions\/1723"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/onesolution.vn\/index.php?rest_route=\/wp\/v2\/media\/1721"}],"wp:attachment":[{"href":"https:\/\/onesolution.vn\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=289"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/onesolution.vn\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=289"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/onesolution.vn\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=289"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}