HP 2015 Annual Report Download - page 39

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The Separation could result in substantial tax liability.
We obtained an opinion of outside counsel that, for U.S. federal income tax purposes, the Separation qualified, for both the company and our
stockholders, as a reorganization within the meaning of Sections 368(d)(1)(D) and 355 of the U.S. Internal Revenue Code of 1986, as amended. In addition,
we obtained a private letter ruling from the Internal Revenue Service (the "IRS") and opinions of outside counsel regarding certain matters impacting the U.S.
federal income tax treatment of the Separation for the company and certain related transactions as transactions that are generally tax-free for U.S. federal
income tax purposes. The opinions of outside counsel and the IRS private letter ruling were based, among other things, on various factual assumptions we
have authorized and representations we have made to outside counsel and the IRS. If any of these assumptions or representations are, or become, inaccurate or
incomplete, reliance on the opinions and IRS private letter ruling may be affected. An opinion of outside counsel represents their legal judgement but is not
binding on the IRS or any court. Accordingly, there can be no assurance that the IRS will not challenge the conclusions reflected in the opinions or that a
court would not sustain such a challenge. Notwithstanding the foregoing, we incurred certain tax costs in connection with the Separation, including non-U.S.
tax expenses resulting from the Separation in multiple non-U.S. jurisdictions that do not legally provide for tax-free Separation, which may be material. If the
Separation or certain internal transactions undertaken in anticipation of the Separation are determined to be taxable for U.S. federal income tax purposes, we,
our stockholders that are subject to U.S. federal income tax and/or Hewlett Packard Enterprise could incur significant U.S. federal income tax liabilities.
Hewlett Packard Enterprise or HP Inc. may fail to perform under the transaction agreements executed as part of the Separation.
In connection with the Separation, Hewlett Packard Enterprise and HP Inc. entered into several agreements, including among others a transition services
agreement, a separation and distribution agreement, a tax matters agreement, an employee matters agreement, a real estate matters agreement, a commercial
agreement and an IT service agreement. The transition services agreement provides for the performance of certain services by each company for the benefit of
the other for a transition period after the Separation. The separation and distribution agreement, tax matters agreement, employee matters agreement and real
estate matters agreement determine the allocation of assets and liabilities between the companies following the Separation for those respective areas and
include any necessary indemnifications related to liabilities and obligations. The commercial agreement establishes a bilateral relationship between Hewlett
Packard Enterprise and us for the purchase and sale of commercially available products and services for internal use, incorporation and bundling in OEM
products and services, resale to customers and use in the provision of managed services to customers, as well as joint customer pursuits and joint development
activities. The IT service agreement provides for the performance by one of Hewlett Packard Enterprise's subsidiaries of certain application development and
maintenance and IT infrastructure services for us. We will rely on Hewlett Packard Enterprise to satisfy its performance and payment obligations under these
agreements. If Hewlett Packard Enterprise is unable to satisfy its obligations under these agreements, we could incur operational difficulties or losses that
could have a material and adverse effect on our business, financial condition and results of operations.
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None.
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Source: HP INC, 10-K, December 16, 2015 Powered by Morningstar® Document Research℠
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