Income Tax Benefit (Provision)

6 Months Ended

Sep. 30, 2013

Income Tax Disclosure [Abstract]

Income Tax Benefit (Provision)

8. Income Tax Benefit (Provision)

The income tax benefit (provision) in the Condensed Statement of Changes in Net Assets in Liquidation for the respective three and six month periods ended September 30, 2013, was determined by computing the current and deferred tax provisions for the interim periods using the GUC Trust’s statutory tax rate of 39.6% that became effective on April 1, 2013. The GUC Trust’s statutory rate of 35% previously in effect was utilized for the respective three and six month periods ended September 30, 2012. An annual effective tax rate is not determinable because the GUC Trust’s only significant source of income is gains on distributions of New GM Securities, which are not determinable until realized.

The components of the income tax benefit (provision) in the Condensed Statements of Changes in Net Assets in Liquidation for the respective three and six month periods ended September 30, 2013 and 2012, are as follows:

	Three Months Ended September 30,					Six Months Ended September 30,
(in thousands)	2013		2012			2013		2012
Current	$	—	$	—		$	—	$	—
Deferred		331,015		(20,318	)		164,845		88,265
Total	$	331,015	$	(20,318	)	$	164,845	$	88,265

Deferred taxes in the accompanying Condensed Statement of Net Assets in Liquidation at September 30, 2013, are comprised of the following components:

Deferred tax assets:
Reserves for expected costs of liquidation	$	14,694
Net operating losses		226,419
Total deferred tax assets before valuation allowance		241,113
Less: Valuation allowance		(103,867	)
Net deferred tax assets		137,246
Deferred tax liabilities:
Fair value in excess of tax basis of holdings of New GM Securities		(137,246	)
Total deferred tax liability		(137,246	)
Net deferred tax liability	$	—

As previously disclosed in the GUC Trust’s Form 10-Q for the quarter ended June 30, 2013, certain U.S. federal income tax returns of MLC are currently under audit by the Internal Revenue Service. In connection therewith, during the quarter ended September 30, 2013, the GUC Trust made a determination to file its U.S. federal income tax returns taking the tax position that beneficial ownership for a substantial majority of New GM Securities was transferred from MLC to the GUC Trust on March 31, 2011, and that the tax basis of such New GM Securities should be determined with reference to the value of such securities on such date. Such new tax position will result in an increase in the tax basis of the New GM Securities and, therefore, reduced taxable gains and increased taxable losses on distributions and sales of New GM Securities since March 31, 2011. A tax benefit of $411.6 million (net of establishment of a valuation allowance against deferred tax assets of $103.9 million) related to the new tax position has been recognized in the accompanying financial statements for the respective three and six month periods ended September 30, 2013, because the GUC Trust believes, based on the available evidence and consultation with GUC Trust professionals as of September 30, 2013, that it is more likely than not that the new tax position in the amounts to be reflected in the GUC Trust’s income tax returns, will be sustained on examination by the Internal Revenue Service, based on the technical merits of the position. Such new tax position, however, as of the date hereof, has not been sustained on examination by the Internal Revenue Service.

The valuation allowance against deferred tax assets referred to above of $103.9 million was provided during the respective three and six month periods ended September 30, 2013, due to uncertainty as to whether the deferred tax assets are realizable. Realization of the deferred tax assets is solely dependent upon the generation of taxable gains upon the distribution or sale of New GM Securities in the future, which is not determinable prior to occurrence.

During the three months ended September 30, 2012, the valuation allowance of $49.2 million established during the previous quarter was reversed due to anticipated taxable gains exceeding deductible items as a result of the increase in the fair value of the New GM Securities during the three months ended September 30, 2012.