ServiceMagic 2010 Annual Report Download - page 40

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discontinued operations for the year ended December 31, 2010 is a $9.1 million expense and a $7.0 million expense, net of related deferred taxes
of $5.8 million and $4.4 million, respectively, for interest on unrecognized tax benefits. At December 31, 2010 and 2009, the Company has
accrued $97.7 million and $68.7 million, respectively, for the payment of interest. At December 31, 2010 and 2009, the Company has accrued
$5.0 million for penalties.
The Company is routinely under audit by federal, state, local and foreign authorities in the area of income tax. These audits include
questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions.
The Internal Revenue Service is currently examining the Company's tax returns for the years ended December 31, 2001 through 2006. The
statute of limitations for these years has currently been extended to December 31, 2011, but is expected to be extended further. Various state,
local and foreign jurisdictions are currently under examination, the most significant of which are California, New York and New York City for
various tax years beginning with December 31, 2003. Income taxes payable include reserves considered sufficient to pay assessments that may
result from examination of prior year tax returns. Changes to reserves from period to period and differences between amounts paid, if any, upon
resolution of issues raised in audits and amounts previously provided may be material. Differences between the reserves for tax contingencies
and the amounts owed by the Company are recorded in the period they become known. The Company believes that it is reasonably possible that
its unrecognized tax benefits could decrease by $41.3 million within twelve months of the current reporting date primarily due to expirations of
statutes of limitation, the reversal of deductible temporary differences that will primarily result in a corresponding decrease in net deferred tax
assets, the reversal of state tax reserves based upon the receipt of favorable income tax rulings, and settlements. Included in this amount is
$4.9 million which will reverse in the first quarter of 2011 as a result of the receipt of a favorable state income tax ruling. An estimate of other
changes in unrecognized tax benefits, while potentially significant, cannot be made.
Discontinued operations
Discontinued operations in the accompanying consolidated statement of operations include InstantAction, which ceased operations during
the fourth quarter of 2010, Evite, Gifts.com and IAC Advertising Solutions through December 1, 2010, HSNi, ILG, Ticketmaster and Tree.com
through August 20, 2008, and EPI through May 30, 2008.
The Company recognized after-tax gains of $140.8 million on the tax-free exchange of Evite, Gifts.com and IAC Advertising Solutions in
2010 and $22.3 million on the sale of EPI in 2008.
The 2010 amount is primarily due to losses of InstantAction, which includes a pre-tax impairment charge related to goodwill of
$31.6 million. The 2009 amount is principally due to losses of InstantAction and tax return to provision adjustments related to the spun-off
entities and interest on tax contingencies. The 2008 amount is principally due to the losses of HSNi, Tree.com and EPI, which include pre-tax
impairment charges related to goodwill and indefinite-lived intangible assets of $221.5 million and $78.5 million, respectively, for HSNi and
$132.5 million and $33.4 million, respectively, for Tree.com. The losses from HSNi, Tree.com and EPI were partially offset by income of
Ticketmaster and ILG.
36
Years Ended December 31,
2010 % Change 2009 % Change 2008
(Dollars in thousands)
Gain on Liberty Exchange
$
140,768
NM
$
—
—
$
—
Gain on sale of discontinued
operations, net of tax
—
—
—
(
100
)%
23,314
Loss from discontinued operations,
net of tax
(37,023
)
58
%
(23,439
)
(93
)%
(329,410
)