Income Taxes	9 Months Ended
Sep. 28, 2013
Income Taxes	Note K – Income Taxes The effective tax rate for the third quarter and year-to-date 2013 was 49.0% and 61.7%, respectively, compared to -5.9% and -0.5%, respectively, for the same periods of 2012. The increase in income tax expense and effective tax rate from the third quarter of 2012 is primarily attributable to the sale of the Company’s investment in Office Depot de Mexico, which is discussed in Note N. The Company paid $117.3 million of Mexican income tax upon the sale and estimates to incur additional U.S. income tax expense of $32.7 million due to dividend income and Subpart F income in 2013 as a result of the sale, for total estimated income tax expense of $150 million. After application of interim period tax accounting, $145.6 million of the total estimated income tax expense was recognized in the third quarter of 2013, with the remainder to be recognized in the fourth quarter of 2013. In addition, the effective tax rate for year-to-date 2012 includes the accrued benefit related to the favorable settlement of the U.S. Internal Revenue Service (“IRS”) examination of the 2009 and 2010 tax years, as discussed below. The year-to-date 2012 effective tax rate was also impacted by the recovery of purchase price that was treated as a purchase price adjustment for tax purposes. As discussed in Note E, this recovery would have been a reduction of related goodwill for financial reporting purposes, but the related goodwill was impaired in 2008. Additionally, the loss on extinguishment of debt in the United States during the first quarter of 2012 did not generate a financial statement tax benefit because of existing valuation allowances. The effective tax rates for all presented periods reflect the recognition of tax expense in tax jurisdictions with pretax earnings and the absence of deferred tax benefits on pretax losses of certain tax jurisdictions with valuation allowances. Accordingly, interim income tax accounting is likely to result in significant variability of the effective tax rate throughout the course of the year. Changes in income projections and the mix of income across jurisdictions could also impact the effective tax rate each quarter. Upon the sale of Office Depot de Mexico in the third quarter of 2013, $4.7 million of income tax expense was reclassified from accumulated other comprehensive income to the Consolidated Statement of Operations to remove the residual income tax effects associated with currency translation on the Company’s investment in Office Depot de Mexico. Such income tax effects were recorded in the cumulative translation account, which is a component of Accumulated other comprehensive income, due to intraperiod allocations required in the fourth quarter of 2012 when the Company removed its indefinite reinvestment assertion with respect to certain foreign earnings accumulated at Office Depot de Mexico. Also as a result of the sale, the Company realized an income tax benefit of $5.2M for equity compensation deductions for which no benefit was previously recorded. The income tax benefit was recorded as additional paid-in capital in the third quarter of 2013. The Company expects to utilize all of its U.S. federal net operating loss (“NOL”) carryfowards in 2013 as a consequence of the disposition of Office Depot de Mexico. The Company has reached a settlement with the IRS Appeals Division to close the previously-disclosed IRS deemed royalty assessment relating to 2009 and 2010 foreign operations. The settlement was subject to the Congressional Joint Committee on Taxation approval, which was received during the second quarter of 2013. The resolution of this matter has closed all known disputes with the IRS relating to tax years 2009 and 2010 and resulted in a refund of approximately $14 million, which was received during the third quarter of 2013, from a previously approved carryback of a tax accounting method change. For the 2011 year, final resolution of this matter was received in October 2013 with no change to the Company’s tax return. The Company files a U.S. federal income tax return and other income tax returns in various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations for years before 2009. Additionally, the U.S. federal tax return for 2012 is under review, and it is reasonably possible that the audits for one or more of these periods will be closed prior to the end of 2013. Significant international tax jurisdictions include the UK, the Netherlands, France and Germany. Generally, the Company is subject to routine examination for years 2008 and forward in these jurisdictions. It is reasonably possible that certain of these audits will close within the next 12 months, which the Company does not believe would result in a material change in its accrued uncertain tax positions. Additionally, the Company anticipates that it is reasonably possible that new issues will be raised or resolved by tax authorities that may require changes to the balance of unrecognized tax benefits; however, an estimate of such changes cannot reasonably be made. The Company has significant deferred tax assets in the U.S. and in foreign jurisdictions against which valuation allowances have been established and will continue to assess the realizability of these deferred tax assets. There are certain foreign jurisdictions where the Company believes it is necessary to see further positive evidence, such as sustained achievement of cumulative profits, before any valuation allowances can be released with respect to these operations. If such positive evidence develops in 2013, the Company may release all or a portion of the remaining valuation allowances in these jurisdictions as early as the fourth quarter of 2013. Such release would have a positive impact on our income tax expense in the period of release. On September 13, 2013, the IRS and U.S. Treasury Department issued final regulations addressing the deduction and capitalization of tangible property expenditures, which are effective beginning with the 2014 tax year. The Company is currently evaluating the changes required by these regulations but does not expect them to have a material impact on the Company’s consolidated financial statements.

Note K – Income Taxes

The effective tax rate for the third quarter and year-to-date 2013 was 49.0% and 61.7%, respectively, compared to -5.9% and -0.5%, respectively, for the same periods of 2012. The increase in income tax expense and effective tax rate from the third quarter of 2012 is primarily attributable to the sale of the Company’s investment in Office Depot de Mexico, which is discussed in Note N. The Company paid $117.3 million of Mexican income tax upon the sale and estimates to incur additional U.S. income tax expense of $32.7 million due to dividend income and Subpart F income in 2013 as a result of the sale, for total estimated income tax expense of $150 million. After application of interim period tax accounting, $145.6 million of the total estimated income tax expense was recognized in the third quarter of 2013, with the remainder to be recognized in the fourth quarter of 2013. In addition, the effective tax rate for year-to-date 2012 includes the accrued benefit related to the favorable settlement of the U.S. Internal Revenue Service (“IRS”) examination of the 2009 and 2010 tax years, as discussed below. The year-to-date 2012 effective tax rate was also impacted by the recovery of purchase price that was treated as a purchase price adjustment for tax purposes. As discussed in Note E, this recovery would have been a reduction of related goodwill for financial reporting purposes, but the related goodwill was impaired in 2008. Additionally, the loss on extinguishment of debt in the United States during the first quarter of 2012 did not generate a financial statement tax benefit because of existing valuation allowances.

The effective tax rates for all presented periods reflect the recognition of tax expense in tax jurisdictions with pretax earnings and the absence of deferred tax benefits on pretax losses of certain tax jurisdictions with valuation allowances. Accordingly, interim income tax accounting is likely to result in significant variability of the effective tax rate throughout the course of the year. Changes in income projections and the mix of income across jurisdictions could also impact the effective tax rate each quarter.

Upon the sale of Office Depot de Mexico in the third quarter of 2013, $4.7 million of income tax expense was reclassified from accumulated other comprehensive income to the Consolidated Statement of Operations to remove the residual income tax effects associated with currency translation on the Company’s investment in Office Depot de Mexico. Such income tax effects were recorded in the cumulative translation account, which is a component of Accumulated other comprehensive income, due to intraperiod allocations required in the fourth quarter of 2012 when the Company removed its indefinite reinvestment assertion with respect to certain foreign earnings accumulated at Office Depot de Mexico.

Also as a result of the sale, the Company realized an income tax benefit of $5.2M for equity compensation deductions for which no benefit was previously recorded. The income tax benefit was recorded as additional paid-in capital in the third quarter of 2013. The Company expects to utilize all of its U.S. federal net operating loss (“NOL”) carryfowards in 2013 as a consequence of the disposition of Office Depot de Mexico.

The Company has reached a settlement with the IRS Appeals Division to close the previously-disclosed IRS deemed royalty assessment relating to 2009 and 2010 foreign operations. The settlement was subject to the Congressional Joint Committee on Taxation approval, which was received during the second quarter of 2013. The resolution of this matter has closed all known disputes with the IRS relating to tax years 2009 and 2010 and resulted in a refund of approximately $14 million, which was received during the third quarter of 2013, from a previously approved carryback of a tax accounting method change. For the 2011 year, final resolution of this matter was received in October 2013 with no change to the Company’s tax return.

The Company files a U.S. federal income tax return and other income tax returns in various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations for years before 2009. Additionally, the U.S. federal tax return for 2012 is under review, and it is reasonably possible that the audits for one or more of these periods will be closed prior to the end of 2013.

Significant international tax jurisdictions include the UK, the Netherlands, France and Germany. Generally, the Company is subject to routine examination for years 2008 and forward in these jurisdictions. It is reasonably possible that certain of these audits will close within the next 12 months, which the Company does not believe would result in a material change in its accrued uncertain tax positions. Additionally, the Company anticipates that it is reasonably possible that new issues will be raised or resolved by tax authorities that may require changes to the balance of unrecognized tax benefits; however, an estimate of such changes cannot reasonably be made.

The Company has significant deferred tax assets in the U.S. and in foreign jurisdictions against which valuation allowances have been established and will continue to assess the realizability of these deferred tax assets. There are certain foreign jurisdictions where the Company believes it is necessary to see further positive evidence, such as sustained achievement of cumulative profits, before any valuation allowances can be released with respect to these operations. If such positive evidence develops in 2013, the Company may release all or a portion of the remaining valuation allowances in these jurisdictions as early as the fourth quarter of 2013. Such release would have a positive impact on our income tax expense in the period of release.

On September 13, 2013, the IRS and U.S. Treasury Department issued final regulations addressing the deduction and capitalization of tangible property expenditures, which are effective beginning with the 2014 tax year. The Company is currently evaluating the changes required by these regulations but does not expect them to have a material impact on the Company’s consolidated financial statements.