Verschärfung der Verlustabzugsbeschränkung durch § 8c KStG und deren Einfluss auf den Erwerb von Anteilen an Kapitalgesellschaften (Tightening of the Tax Loss Deduction Restriction Under Section 8c German Corporate Tax Code (Körperschaftsteuergesetz) and its Impact on the Acquisition of Shares in Corporations)

From the 2008 assessment period onwards, a new regulation regarding the loss offset in case of share acquisitions was implemented under section 8c of the German Corporate Tax Code (Körperschaftsteuergesetz). This new provision is particularly important in light of the current financial and economic crisis and the resulting record losses in many companies. In this paper we analyze the effects of the new tax loss deduction restriction on investment and acquisition decisions. To quantify these effects we apply a model of marginal prices in which an investor considers the legal consequences of section 8c on the buyer's price expectations already at the acquisition stage. We find that the loss deduction restriction generally has a negative impact on the value of shares, so that investors may even refrain from investing at all. A sensitivity analysis reveals that the size of the holding and the corporate and income tax rates emerge as important parameters. We show that these factors can be used to reduce or even eliminate the undesirable legal consequences and distortions of section 8c if the investor opts for alternative loss usage strategies or a two-stage acquisition