hard · Private Equity accounting-flow
How does the 'Tax Amortization Benefit' (TAB) relate to the treatment of PIK interest in a Section 338(h)(10) transaction?
- The TAB is a separate calculation for intangibles and does not directly interact with PIK interest, though both affect the final cash tax expense
- The TAB must first be used in full to pay down the outstanding PIK interest before it can be added to the loan principal balance.
- The mere presence of PIK interest anywhere within the capital structure automatically eliminates the ability to claim a TAB deduction.
- The stated PIK interest rate itself is directly added to the discount rate used to calculate the net present value of the TAB going forward each fiscal year.
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