06 Oct Net Operating Loss Shells: Carrying Forward Losses for Tax Purposes
A fantastic article was published today on SeekingAlpha the benefit of using Net Operating Loss (NOL) carry-forwards and how they can, if structured properly, be used as fantastic asset to avoid corporate tax. The government doesn’t like them for obvious reasons, but they remain a great way for companies, especially those looking toward growth, to avoid paying taxes on profits. In NOL situations, typically the shell’s cost will include the NOLs priced-in, but frequently it will appear at steep discount for the actual dollar value of the NOL, which is where the real benefit of the losses can come into play.
The holders of the NOL shell can also recoup some of their losses in the shell by allowing a reverse merger to take place. It allows the original shell investors to not take a complete bath.
Rather than completely summarize the article, I would suggest a quick perusal of the link I’ve included above. It briefly outlines the methods for monetizing NOL shells as well as the various types and stages of a NOL shell corporation.
Make no mistake, NOLs are often in high demand and, depending on how clean/dirty the shell is, the prices can range greatly.