September 23, 2007
“If you have a liability that declines in value because your credit worsens, you have a gain”
Posted by Gordon Smith
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Comments (1)

1. Posted by Jake on September 23, 2007 @ 15:24 | Permalink

Yet another case of one-sided accounting. Investors write down their liabilities while preserving the historical books value of the associated assets. All from a GAAP viewpoint, mind you.

From an income tax viewpoint, the one-sided accounting cuts the opposite direction. Investors inflate the basis of assets by "incurring" phantasmic liabilities that never see the light on day on an audited financial statement.

The only constant is the insatiable appetite of opportunistic investors for having their cake and eating it too, whether it is financial reporting or tax reporting that is at issue.

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