Morgan Stanley 2009 Annual Report Download - page 219

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
During 2009 and the one month ended December 31, 2008, the valuation allowance was decreased by $97
million and increased by $1 million, respectively, related to the ability to utilize certain separate federal, state and
foreign net operating losses.
The Company had federal and state net operating loss carryforwards for which a deferred tax asset of $1,978
million and $4,080 million was recorded as of December 31, 2009 and December 31, 2008, respectively. These
carryforwards are subject to annual limitations and will begin to expire in 2028. The deferred tax asset for federal
net operating loss carryforwards did not include approximately $75 million related to excess tax benefits from the
exercise or conversion of stock-based compensation awards which had not been realized as of December 31,
2008. These previously unrecognized tax benefits were realized and recorded in Paid-in capital as of
December 31, 2009.
The Company had net operating loss carryforwards in Japan for which a deferred tax asset of $546 million was
recorded as of December 31, 2009. These carryforwards are subject to annual limitations and will begin to expire
in 2016.
The Company had a federal capital loss carryforward for which a related deferred tax asset of $234 million was
recorded as of December 31, 2009. This carryforward is subject to annual limitations on utilization and will
begin to expire in 2015.
The Company had tax credit carryforwards for which a related deferred tax asset of $2,062 million and $2,041
million was recorded as of December 31, 2009 and December 31, 2008, respectively. These carryforwards are
subject to annual limitations on utilization and will begin to expire in 2016.
The Company believes the recognized net deferred tax asset of $7,615 million (after valuation allowance) is
more likely than not to be realized based on expectations as to future taxable income in the jurisdictions in which
it operates.
The Company recorded net income tax benefits (provision) to Paid-in capital related to employee stock
compensation transactions of $33 million, $(131) million, $280 million and $(4) million in 2009, fiscal 2008,
fiscal 2007 and the one month ended December 31, 2008, respectively. The $33 million net income tax benefit
related to employee stock compensation transactions recorded to Paid-in capital in 2009 includes approximately
$75 million of excess tax benefits that were realized in 2009 related to certain stock-based compensation awards
exercised or converted in prior years.
Cash paid for income taxes was $1,028 million, $1,406 million, $3,404 million and $113 million in 2009, fiscal
2008, fiscal 2007 and the one month ended December 31, 2008, respectively. During fiscal 2008, the Company
received a refund of $1,200 million for overpayment of estimated taxes remitted during fiscal 2007.
The following table presents the U.S. and non-U.S. components of income before income tax expense/(benefit)
and extraordinary gain for the years ended in 2009, fiscal 2008, fiscal 2007 and the one month ended
December 31, 2008, respectively:
2009
Fiscal
2008
Fiscal
2007
One Month Ended
December 31, 2008
(dollars in millions)
U.S. ............................................... $(1,490) $(2,914) $(5,520) $(1,120)
Non-U.S.(1) .......................................... 2,347 4,051 8,296 (907)
$ 857 $ 1,137 $ 2,776 $(2,027)
(1) Non-U.S. income is defined as income generated from operations located outside the U.S.
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