Sears 2013 Annual Report Download - page 101

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SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
101
described above. At this time, we are not able to make a reasonable estimate of the range of impact on the balance of
unrecognized tax benefits or the impact on the effective tax rate related to these items. A reconciliation of the
beginning and ending amount of gross unrecognized tax benefits (“UTB”) is as follows:
Federal, State, and Foreign Tax
millions February 1,
2014 February 2,
2013 January 28,
2012
Gross UTB Balance at Beginning of Period . . . . . . . . . . . . . . . . . . . . . $ 161 $ 192 $ 192
Tax positions related to the current period:
Gross increases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 21 22
Gross decreases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —(8)(8)
Tax positions related to prior periods:
Gross increases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 20
Gross decreases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17)(33)(19)
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1)(1)(4)
Lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6)(10)(10)
Exchange rate fluctuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) — (1)
Gross UTB Balance at End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . $ 150 $ 161 $ 192
At the end of 2013, we had gross unrecognized tax benefits of $150 million. Of this amount, $91 million
would, if recognized, impact our effective tax rate, with the remaining amount being comprised of unrecognized tax
benefits related to gross temporary differences or any other indirect benefits. We expect that our unrecognized tax
benefits could decrease up to $21 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 1, 2014, the total amount of interest and penalties
recognized within the related tax liability in our Consolidated Balance Sheet was $53 million ($36 million net of
federal benefit). The total amount of net interest expense recognized in our Consolidated Statement of Operations
for 2013 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' 2008 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 2012, and Kmart is under
examination by such jurisdictions for the years 2003 through 2012.
NOTE 11—REAL ESTATE TRANSACTIONS
Gain on Sales of Assets
We recognized $667 million, $468 million, and $64 million in gains on sales of assets during 2013, 2012 and
2011, respectively. These gains were primarily a function of several large real estate transactions.
During 2013, we recorded gains on sales of assets of $180 million recognized on the amendment and early
termination of the leases on two properties operated by Sears Canada for which Sears Canada received $184 million
($191 million Canadian) in cash proceeds. Additionally, in 2013, we recorded gains on sales of assets of $357
million recognized on the surrender and early termination of the leases of five properties operated by Sears Canada,
for which Sears Canada received $381 million ($400 million Canadian) in cash proceeds. Gains on sales of assets
recorded during 2013 also include gains of $67 million related to the sale of one store previously operated under The
Great Indoors format, two Sears Full-line stores and two Kmart stores for which we received $98 million in cash
proceeds.