Clearwire 2008 Annual Report Download - page 55

an
dCl
ear
wi
re
Cl
ass B
C
ommon
S
toc
ki
n a transact
i
on
i
nten
d
e
d
to
b
e tax-
f
ree
f
or
U
n
i
te
dS
tates
f
e
d
era
li
ncome ta
x
p
urposes (which the Operatin
g
A
g
reement refers to as a holdin
g
compan
y
exchan
g
e). In particular, if Clearwire, a
s
t
he managing member of Clearwire Communications, has approved a taxable sale by Clearwire Communications o
f
f
ormer Spr
i
nt assets t
h
at are
i
ntang
ibl
e property an
d
t
h
at wou
ld
cause Spr
i
nt to
b
ea
ll
ocate
d
un
d
er Sect
i
on 704(c) o
f
t
he Code more than $10 million of built-in
g
ain durin
g
an
y
36-month period, then, durin
g
a specified 15-business-
d
ay per
i
o
d
,C
l
earw
i
re Commun
i
cat
i
ons w
ill b
e prec
l
u
d
e
df
rom enter
i
ng
i
nto any
bi
n
di
ng contract
f
or t
h
e taxa
bl
e
s
a
l
eo
f
t
h
e
f
ormer Spr
i
nt assets, an
d
Spr
i
nt w
ill h
ave t
h
er
i
g
h
t to trans
f
er C
l
earw
i
re Commun
i
cat
i
ons C
l
ass B
Common Interests an
d
C
l
earw
i
re C
l
ass B Common Stoc
k
to one or more
h
o
ldi
n
g
compan
i
es, an
d
to trans
f
er t
h
os
e
holding companies to Clearwire in holding company exchanges. In any holding company exchange, Clearwire will
s
ucceed to all of the built-in gain and other tax characteristics associated with the transferred Clearwire Com-
m
un
i
cat
i
ons C
l
ass B Common Interests,
i
nc
l
u
di
n
g
(1)
i
nt
h
e case o
f
a trans
f
er
by
Spr
i
nt, an
y
rema
i
n
i
n
g
port
i
on o
f
t
he built-in
g
ain existin
g
at the formation of Clearwire Communications and associated with the transferre
d
Clearwire Communications Class B Common Interests, and any Section 704(c) consequences associated with tha
t
b
u
il
t-
i
n
g
a
i
n, an
d
(2)
i
nt
h
e case o
f
an
y
trans
f
er, an
yb
u
il
t-
i
n
g
a
i
nar
i
s
i
n
g
a
f
ter t
h
e
f
ormat
i
on o
f
C
l
earw
i
r
e
Communications and associated with the transferred Clearwire Communications Class B Common Interests.
S
ect
i
on 384 o
f
t
h
eCo
d
e may
li
m
i
tt
h
ea
bili
ty o
f
C
l
earw
i
re to use
i
ts NOLs ar
i
s
i
ng
b
e
f
ore t
h
e
h
o
ldi
ng company
e
xc
h
ange to o
ff
set any
b
u
il
t-
i
nga
i
no
f
Spr
i
nt or an Investor to w
hi
c
h
C
l
earw
i
re succee
d
s
i
n suc
h
an exc
h
ange
.
A
ccordin
g
l
y
, Clearwire ma
y
incur a material liabilit
y
for taxes as a result of a holdin
g
compan
y
exchan
g
e, even if it
h
as su
b
stant
i
a
l
NOLs. C
l
earw
i
re Commun
i
cat
i
ons
i
s requ
i
re
d
to ma
k
e
di
str
ib
ut
i
ons to C
l
earw
i
re
i
n amount
s
n
ecessary to pay a
ll
taxes reasona
bl
y
d
eterm
i
ne
db
yC
l
earw
i
re to
b
e paya
bl
ew
i
t
h
respect to
i
ts
di
str
ib
ut
i
ve s
h
are o
f
t
he taxable income of Clearwire Communications, after takin
g
into account the net operatin
g
loss deductions an
d
other tax benefits reasonably expected to be available to Clearwire. See the sections titled “Risk Factors
—
Man
d
atory tax
di
str
ib
ut
i
ons may
d
epr
i
ve C
l
earw
i
re Commun
i
cat
i
ons o
ff
un
d
st
h
at are requ
i
re
di
n
i
ts
b
us
i
ness”
b
e
l
ow an
d
“Certa
i
nRe
l
at
i
ons
hi
ps an
d
Re
l
ate
d
Transact
i
ons”
b
e
gi
nn
i
n
g
on pa
g
e 122 o
f
t
hi
s report
.
M
andatory tax distributions may deprive Clearwire Communications of funds that are required in its
b
usiness.
Under the Operatin
g
A
g
reement, Clearwire Communications will make distributions to its members,
g
enerall
y
on a
p
ro rata basis in
p
ro
p
ortion to the number of Clearwire Communications Class A and Class B Common
Interests
h
e
ld b
y eac
h
mem
b
er,
i
n amounts so t
h
at t
h
e aggregate port
i
on
di
str
ib
ute
d
to C
l
earw
i
re
i
n eac
hi
nstance
will be the amount necessar
y
to pa
y
all taxes then reasonabl
y
determined b
y
Clearwire to be pa
y
able with respect t
o
i
ts distributive share of the taxable income of Clearwire Communications (includin
g
an
y
items of income,
g
ain, loss
or
d
e
d
uct
i
on a
ll
ocate
d
to C
l
earw
i
re un
d
er t
h
epr
i
nc
i
p
l
es o
f
Sect
i
on 704(c) o
f
t
h
eCo
d
e), a
f
ter ta
ki
ng
i
nto account a
ll
n
et operat
i
n
gl
oss
d
e
d
uct
i
ons an
d
ot
h
er tax
b
ene
fi
ts reasona
bly
expecte
d
to
b
eava
il
a
bl
etoC
l
earw
i
re. T
h
es
e
m
andator
y
tax distributions, which must be made on a pro rata basis to all members even if those members ar
e
allocated less income, proportionately, than is Clearwire, may deprive Clearwire Communications of funds that ar
e
r
equ
i
re
di
n
i
ts
b
us
i
ness.
T
ax loans Clearwire Communications may be required to make to Sprint in connection with the sale of
c
ertain former Sprint built-in gain assets may deprive Clearwire Communications of funds that are
r
e
q
uire
d
in its
b
usiness
.
Under the Operatin
g
A
g
reement, if Clearwire Communications or an
y
of its subsidiaries enters into
a
t
ransact
i
on t
h
at resu
l
ts
i
nt
h
e recogn
i
t
i
on o
f
any port
i
on o
f
t
h
e
b
u
il
t-
i
nga
i
nw
i
t
h
respect to a
f
ormer Spr
i
nt asset
(ot
h
er t
h
an
i
n connect
i
on w
i
t
h
t
h
e
di
sso
l
ut
i
on o
f
C
l
earw
i
re Commun
i
cat
i
ons or t
h
e
di
s
p
os
i
t
i
on o
f
certa
i
ns
p
ec
ifi
e
d
S
print assets), Clearwire Communications will be required, upon deliver
y
b
y
Sprint of a timel
y
request therefore, t
o
m
a
k
e a tax
l
oan to Spr
i
nt on t
h
e terms set
f
ort
hi
nt
h
e Operat
i
ng Agreement. T
h
epr
i
nc
i
pa
l
amount o
f
any tax
l
oan t
o
S
pr
i
nt w
ill b
et
h
e amount
by
w
hi
c
h
t
h
e
b
u
il
t-
i
n
g
a
i
n reco
g
n
i
ze
dby
Spr
i
nt on t
h
esa
l
eo
ff
ormer Spr
i
nt assets excee
ds
an
y
tax
l
osses a
ll
ocate
dby
C
l
earw
i
re Commun
i
cat
i
ons to Spr
i
nt
i
nt
h
e taxa
bl
e
y
ear
i
nw
hi
c
h
t
h
esa
l
eo
f
suc
hb
u
il
t
i
n
gain assets occurs, multiplied by then-highest marginal federal and state income tax rates applicable to corporation
s
r
es
id
ent
i
nt
h
e state
i
nw
hi
c
h
Spr
i
nt’s pr
i
nc
i
pa
l
corporate o
ffi
ces are
l
ocate
d
(ta
ki
n
gi
nto account t
h
e
d
e
d
uct
ibili
t
y
o
f
s
tate taxes
f
or
f
e
d
era
li
ncome tax purposes). Interest on an
y
tax
l
oan w
ill b
epa
y
a
bl
e
by
Spr
i
nt to C
l
earw
i
r
e
Communications semiannuall
y
at a floatin
g
rate equal to the hi
g
her of (a) the interest rate for Clearwire
43