Facing a $ 17 billion second quarter loss and $ 32 billion in spill cleanup costs, BP has decided to take a $ 10 billion tax credit. Companies that have really big issues get this kind of cash loan given to them. It is nevertheless argued how legal this tax credit really is. The government is going to end up paying more for the oil spill cleanup than they intended with tax credits like this. Source of article – BP preparing to take a $ 10 billion tax credit by Personal Money Store.
Losses lead to BP tax credit
The way current IRS law is written, a company that is in severe financial trouble can take an extensive tax credit. This year’s second quarter cost BP $ 17 billion. BP stock falling is where most of this loss comes from. BP hasn’t needed to borrow any money yet, although it is losing quite a bit of money.
How BP tax credit will effect things
The government will end up paying half the expenditures for the oil spill with a $ 10 billion tax credit being taken by BP. BP said they’d pay at least $ 20 billion for the oil spill. The government will almost be paying half of cleanup costs when considering $ 10 billion is half that account.
No BP tax credit
”I do not think anybody would prefer that [BP] do that,” is what Press Secretary Robert Gibbs said about the BP tax credit. The SEC accepted $ 535 million from Goldman Sachs while Goldman Sachs tried to write it off on their taxes, which is the only thing this situation even compares to. No other company has ever tried taking out loans till payday and then trying to write those loans off like this.
Wanting the BP tax credit
Although it appears the tax credit shouldn’t be given, there may be some reasons to consider giving BP this credit. BP has promised to pay all cleanup costs of the spill — which will prove to be expensive. Easy cash loans could be the only BP can pay for the cleanup unless they discover a way to stay solvent. BP makes the argument that without the $ 10 billion, they cannot stay in business and won’t be able to pay for any of the cleanup. If they are in that situation or not, though, is going to be up to the IRS investigation.
Find more details on this subject
Daily Finance
dailyfinance.com/story/taxes/bp-claiming-9-9b-tax-credit-on-gulf-clean-up-costs/19571518/
Market Watch
miamiherald.com/2010/07/28/1749344/bp-eyes-10b-tax-credit-over-gulf.html#ixzz0uyReljAI
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