Media reports suggest there is a fair bit of interest from industrialists for a clutch of large, but near-bankrupt companies, whose future is being decided under the aegis of the Insolvency and Bankruptcy Code (IBC). In some cases, there are close to half a dozen suitors. However, as the discussions and negotiations proceed, it is becoming apparent that potential tax liabilities on the buyers, and sometimes, sellers, could prove to be deal-breakers. Given these companies owe banks thousands of crores of rupees, but have high-quality assets, all efforts have to be made to ensure they are revived. To be sure, efforts are being made to ensure these assets are protected and transferred to the right hands; the government recently amended the IBC to disallow wilful defaulters from bidding for their own companies. However, prospective buyers have expressed concerns on a bunch of tax provisions that could push up the cost of acquisition. The most troublesome seems to be the minimum alternate tax or MAT. Since any write-off of a loan is reflected as income in the Profit and Loss (P&L), there is a good chance the new promoters would be liable to pay a substantial amount of tax since the debt write-off by banks could run into tens of thousands of crores of rupees. The tax authorities have already brought in some changes for companies facing insolvency proceedings\u2014now, the sum of the unabsorbed depreciation and the brought-forward losses can be deducted from the book profit for the purposes of calculating MAT; earlier, only the lower of the two was allowed as a deduction. However, the tax liability could still be substantial since it is charged at 18.5% under section 115JB of the Income Tax Act and the government should waive it off altogether for deals under IBC. Again, should a new promoter pick up a majority stake of 51% in the distressed company, under the current law, he will not be entitled to carry forward earlier losses. That is unfair since any acquirer will want to hold a controlling interest, and being able to carry forward accumulated losses makes the purchase more viable\u2014Section 79 was brought in to prevent abuse by promoters, but IBC cases do not fall under this category. Moreover, if it turns out that the buyer pays less than the fair market value of the asset, the difference attracts capital gains tax under Section 50CA. Given that the companies in question are highly over-leveraged and also in the red, it is unlikely prospective buyers will pay top dollar\u2014that is why they are negotiating big haircuts with the lenders. It is no one\u2019s case buyers should be handed over the businesses for a song, but charging a capital gains tax on the difference is a bad idea. Since it is important the companies quickly find new buyers, it would be unfortunate if deals don\u2019t get closed out because of tax problems.