Starwood 2012 Annual Report Download - page 132

gain as a result of the write-up to fair value of our previously held noncontrolling interest in two hotels in which
we obtained a controlling interest (see Note 4).
Year Ended
December 31,
2012
Year Ended
December 31,
2011
Increase /
(decrease)
from prior
year
Percentage
change
from prior
year
(in millions)
Income Tax (Benefit) Expense ............ $148 $(75) $223 n/m
The increase in income tax expense was the result of higher pretax income and a higher effective rate in
2012 compared to 2011 and large tax benefits generated in 2011 as compared to 2012. Additional income tax
expense due to higher pretax income was approximately $46 million and the increase due to the effective tax rate
in 2012 resulted in incremental income tax expense of approximately $60 million. The increase in the effective
rate is primarily due to higher pretax income in the U.S. as a result of the Bal Harbour residential sales previously
discussed.
Incremental tax benefits in 2011 compared to 2012 amounted to approximately $117 million. In 2011, we
completed transactions that involved certain domestic and foreign subsidiaries. These transactions generated
capital gains, increased the tax basis in subsidiaries including U.S partnerships and resulted in the inclusion of
foreign earnings for U.S. tax purposes, resulting in a net tax benefit of $87 million. The capital gains were largely
reduced by the utilization of capital losses. Additionally, during 2011, the IRS closed its audit with respect to tax
years 2004 through 2006 resulting in a $25 million tax benefit primarily related to the reversal of tax and interest
reserves.
Year Ended
December 31,
2012
Year Ended
December 31,
2011
Increase /
(decrease)
from prior
year
Percentage
change
from prior
year
(in millions)
Discontinued Operations Gain (Loss), Net . . $92 $(13) $105 n/m
During the year ended December 31, 2012, we recorded a gain of $92 million (net of tax) primarily related
to the gain of $78 million (net of tax) from the sale of one wholly owned hotel, which was sold unencumbered by
a management or franchise agreement and a gain of $23 million (net of tax) from the favorable settlement of
certain liabilities associated with a former subsidiary of ITT Corporation, which we acquired in 1998. These
gains were partially offset by a loss of $5 million (net of tax) related to the impairment and loss on sale of four
wholly-owned hotels and a loss of $5 million (net of tax) for accrued interest related to an uncertain tax position
associated with a previous disposition.
During the year ended December 31, 2011, we recorded a loss of $13 million (net of tax), primarily related
to an $18 million pre-tax loss from the sale of our interest in a consolidated joint venture, offset by a $10 million
income tax benefit on the sale. Additionally, we recorded a loss of $5 million (net of tax) for accrued interest
related to an uncertain tax position associated with a previous disposition.
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