Liberty Media Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

Income tax benefit (expense) consists of:



	Years ended December 31,
	2013			2012		2011
	amounts in millions
Current:
Federal	$	(45	)	(7	)	(125	)
State and local	3			4		2
Foreign	5			(1	)	—
	(37		)	(4	)	(123	)
Deferred:
Federal	165			(407	)	(4	)
State and local	7			(58	)	(38	)
Foreign	—			—		—
	172			(465	)	(42	)
Income tax benefit (expense)	$	135		(469	)	(165	)

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

Income tax benefit (expense) differs from the amounts computed by applying the U.S. federal income tax rate of 35% as a result of the following:



	Years ended December 31,
	2013			2012		2011
	amounts in millions
Computed expected tax benefit (expense)	$	(3,100	)	(570	)	(265	)
Non-taxable gain on book consolidation of SIRIUS XM	3,054			—		—
Taxable liquidation of a consolidated subsidiary	—			101		—
Non-taxable exchange of subsidiary	174			—		—
Dividends received deductions	46			40		9
Sale of subsidiary shares to subsidiary treated as a dividend for tax	(56		)	—		—
State and local income taxes, net of federal income taxes	11			(46	)	(22	)
Change in valuation allowance affecting tax expense	9			1		(3	)
Recognition of tax benefits not previously recognized, net	—			5		109
Other, net	(3		)	—		7
Income tax benefit (expense)	$	135		(469	)	(165	)

For the year ended December 31, 2013 the significant reconciling items, as noted in the table above, are the result of a 7.5 billion non-taxable gain on the consolidation of SIRIUS XM on January 18, 2013, as discussed in note 4, and the non-taxable exchange of one of Liberty's consolidated subsidiaries on October 4, 2013, in exchange for Liberty shares (see note 13 for further discussion of this transaction).

For the year ended December 31, 2012 the significant reconciling items, as noted in the table above, are the result of a capital loss realized on the taxable liquidation of a consolidated subsidiary. The realized capital loss was approximately $289 million and as a result a $101 million federal tax benefit was recorded that offset federal tax expense from capital gains realized during the year ended December 31, 2012.

The significant reconciling items for the year ended December 31, 2011, as noted in the table above, are the result of settlements reached with the IRS regarding certain tax positions taken on the Company's prior year tax returns. During the fourth quarter of 2011, the Company and the IRS agreed to proposed tax treatments of several disputed items on the Company's 2010 tax return. Upon settlement, the Company recorded additional tax benefit through the statement of operations due to the reversal of certain tax reserves ($104 million) and settled net tax liabilities previously recorded for cash consideration of $136 million.

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities are presented below:



	December 31,
	2013			2012
	amounts in millions
Deferred tax assets:
Net operating and capital loss carryforwards	$	2,487		45
Accrued stock compensation	99			6
Other accrued liabilities	44			34
Discount on convertible debt	34			—
Deferred revenue	598			16
Other future deductible amounts	24			12
Deferred tax assets	3,286			113
Valuation allowance	(9		)	(6	)
Net deferred tax assets	3,277			107
Deferred tax liabilities:
Investments	457			820
Intangible assets	3,955			91
Other	261			—
Deferred tax liabilities	4,673			911
Net deferred tax liabilities	$	1,396		804

The Company's deferred tax assets and liabilities are reported in the accompanying consolidated balance sheets as follows:



	December 31,
	2013			2012
	amounts in millions
Current deferred tax liabilities (assets)	$	(916	)	(13	)
Long-term deferred tax liabilities (assets)	2,312			817
Net deferred tax liabilities	$	1,396		804

SIRIUS XM's deferred tax assets and liabilities are included in the amounts above although SIRIUS XM's deferred tax assets and liabilities are not offset with Liberty's deferred tax assets and liabilities as SIRIUS XM is not included in the group tax return of Liberty. Liberty's acquisition of a controlling interest in SIRIUS XM's outstanding common stock during January 2013 did not create a change in control under Section 382 of the Internal Revenue Code.

Summary of Income Tax Contingencies [Table Text Block]

A reconciliation of unrecognized tax benefits is as follows:



		December 31,
		2013		2012
		amounts in millions
Balance at beginning of year		$	29	34
	Reductions for tax positions of prior years	—		(5	)
	Increase in tax positions from acquisition	1		—
Balance at end of year		$	30	29

As of December 31, 2013, the Company had recorded tax reserves of $30 million related to unrecognized tax benefits for uncertain tax positions. If such tax benefits were to be recognized for financial statement purposes, $22 million would be reflected in the Company's tax expense and affect its effective tax rate. The Company's estimate of its unrecognized tax benefits related to uncertain tax positions requires a high degree of judgment.

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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