Starwood 2012 Annual Report Download - page 139

During the year ended December 31, 2010, we recorded a net loss on dispositions of approximately
$39 million, primarily related to a $53 million loss on the sale of one wholly-owned hotel (see Note 5) as well as
a $4 million impairment of fixed assets that are being retired in connection with a significant renovation of a
wholly-owned hotel, and a $2 million impairment on one hotel whose carrying value exceeded its fair value.
These charges were partially offset by a gain of $14 million from insurance proceeds received for a claim at a
wholly-owned hotel that suffered damage from a storm in 2008, a $5 million gain as a result of an acquisition of
a controlling interest in a joint venture in which we previously held a non-controlling interest (see Note 4) and a
$4 million gain from the sale of non-hotel assets.
Year Ended
December 31,
2011
Year Ended
December 31,
2010
Increase /
(decrease)
from prior
year
Percentage
change
from prior
year
(in millions)
Income Tax (Benefit) Expense ............ $(75) $27 $(102) n/m
In 2011, the Company 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. The capital gains were largely reduced by the
utilization of capital losses. Due to the uncertainty regarding the Company’s ability to generate capital gain
income, the deferred tax asset associated with these capital losses was offset by a full valuation allowance prior
to these transactions. These transactions resulted in a net tax benefit of $87 million. Additionally, during 2011, an
income tax benefit of approximately $60 million was generated as the result of the sale of two wholly-owned
hotels. Also, in 2011, the IRS closed its audit in respect to tax years 2004 through 2006 resulting in the
recognition of a tax benefit of approximately $25 million, primarily for the reversal of tax and interest reserves.
These benefits were partially offset by tax on increased pretax income and valuation allowance increases in 2011
compared to 2010.
During 2010, the IRS closed its audit with respect to tax years 1998 through 2003 and the Company
recognized a $42 million tax benefit in continuing operations, primarily associated with the refund of interest on
taxes already paid. This benefit was partially offset by interest and taxes recorded on uncertain tax positions,
which resulted in a charge of $23 million.
Year Ended
December 31,
2011
Year Ended
December 31,
2010
Increase /
(decrease)
from prior
year
Percentage
change
from prior
year
(in millions)
Discontinued Operations Gain (Loss), Net . . $(13) $168 $(181) n/m
During the year ended December 31, 2011, we recorded a loss of $13 million primarily related to an
$18 million pretax 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 $5 million of interest charges related to an uncertain
tax position.
During the year ended December 31, 2010, we recorded a gain of $134 million related to the final settlement
with the IRS regarding a disposition in a prior year and a pretax gain of approximately $3 million ($36 million
after tax) related to the sale of one wholly-owned hotel. The tax benefit was related to the realization of a high
tax basis in this hotel that was generated through a previous transaction.
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