I was glad to hear someone on this Board finally point out recently that the only value of tax losses is at the corporate tax rate when used, not the tax loss amount. I would also think that they probably wouldn’t pay the complete value as there are issues that might prevent them from completely using the credits. Below is a KPMG interpretation regarding a cross-border acquisition like a US company buying RVX. It seems to say that the acquirer can use the non-capital losses after acquisition but only against gains in the business that RVX is operating in at acquisition.

 “On an acquisition of control, accrued terminal losses on depreciable properties are deemed realized and bad debts must be written off. These deductions from income in the taxation period that ends at the time of the acquisition of control may increase the target corporation’s non-capital losses. Non-capital losses are only deductible following an acquisition of control within the carry forward period if certain requirements are met. Non-capital losses from carrying on a business may be deductible after the acquisition of control if the business that sustained the losses continues to be carried on with a reasonable expectation of profit. However, such losses are deductible only to the extent of the corporation’s income from the loss business or similar businesses.

Similarly, on a liquidation of an acquired company or the amalgamation of the acquired company with its parent, the pre-acquisition non-capital losses are deductible by the parent but only against income from the business of the acquired corporation in which the losses arose or from a similar business.

Non-capital losses that do not arise from carrying on a business (referred to as ‘property losses’) cannot be used after an acquisition of control. Thus, planning should be undertaken to utilize such losses if possible.”

I have never felt that the tax loss credits could be just sold on their own without acquiring the company.  Also, on a sale of assets (Apabetalone only), the tax losses would stay with RVX. The whole company has to be acquired before the losses can carry to the acquirer, I believe.

“On a sale of assets, any existing losses remain with the corporate seller and generally may be used by the seller to offset capital gains or income realized on the asset sale.

Likewise, a seller’s depreciation pools are not transferred to the buyer on an asset acquisition.”

Below, is from a law firm in Vancouver on Canadian acquisitions. It appears to be saying that for an acquirer to carry the losses forward, they would have to acquire RVX, continue its current business and use the losses against gains in that portion of their business. Capital losses wouldn’t be carried forward but our discussion is non-capital losses like cost of business operations.

“ii. Non-capital losses:   Non-capital losses can only be carried back and carried forward after an acquisition of control if all of the following conditions are satisfied:

(a) the loss was from carrying on a business;

(b) that business continued to be carried on for profit or with a reasonable expectation of profit throughout the year; and

(c) the losses are applied against income from the same or similar business.”