Sears 2012 Annual Report Download - page 95

SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
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benefits could decrease up to $30 million over the next 12 months for tax audit settlements and the expiration of the
statute of limitations for certain jurisdictions.
We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax
overpayments as components of income tax expense. At February 2, 2013, the total amount of interest and penalties
recognized within the related tax liability in our Consolidated Balance Sheet was $57 million ($39 million net of
federal benefit). The total amount of net interest expense recognized in our Consolidated Statement of Operations
for 2012 was $2 million.
We file income tax returns in both the United States and various foreign jurisdictions. The U.S. Internal
Revenue Service (“IRS”) has completed its examination of Holdings' 2006 through 2009 federal income tax returns,
and we are currently working with the IRS appeals division to resolve a single issue arising from these exams. We
have resolved all matters arising from prior IRS exams. In addition, Holdings and Sears are under examination by
various state, local and foreign income tax jurisdictions for the years 2002 through 2010, and Kmart is under
examination by such jurisdictions for the years 2003 through 2010.
NOTE 11—REAL ESTATE TRANSACTIONS
Gain on Sales of Assets
We recognized $468 million, $64 million, and $67 million in gains on sales of assets during 2012, 2011, and
2010, respectively. These gains were primarily a function of several large real estate transactions. During 2012, the
gain on sales of assets included gains of $386 million recognized in connection with real estate transactions which
included a gain of $223 million recognized on the sale of eleven (6 owned and 5 leased) Sears Full-line store
locations to General Growth Properties for $270 million in cash proceeds, and a gain of $163 million recognized on
the surrender and early termination of the leases on three properties operated by Sears Canada, under an agreement
with The Cadillac Fairview Corporation Limited for which Sears Canada received $170 million Canadian in cash
proceeds. In connection with these transactions, we surrendered substantially all of our rights and obligations under
our preexisting lease agreements and agreed to surrender each of the premises in periods ranging from 6 to 23
months from the date of closing. The gain on sales of assets recorded during 2012 also included a gain of $33
million related to the sale of a store operated under The Great Indoors format, one Sears Full-line store, and one
Kmart store.
During 2011, the gain on sales of assets included a gain of $33 million recognized on the sale of two stores
operated under The Great Indoors format and one Kmart store.
During 2010, the gain on sales of assets included a gain recognized on a Sears Auto Center we sold in October
2006, at which time we leased back the property for a period of time. Given the terms of the contract, for accounting
purposes, the excess of proceeds received over the carrying value of the associated property was deferred. We closed
our operations at this location during the first quarter of 2010 and, as a result, recognized a gain of $35 million on
this sale at that time.
Property Acquisitions
During 2012, we purchased one previously leased operating property for $6 million. During 2011, we
purchased five previously leased operating properties for $17 million. During 2010, we did not purchase any
previously leased operating properties. In the normal course of business, we consider opportunities to purchase
leased operating properties, as well as offers to sell owned, or assign leased, operating and non-operating properties.
These transactions may, individually or in the aggregate, result in material proceeds or outlays of cash. In addition,
we review leases that will expire in the short-term in order to determine the appropriate action to take with respect to
them.