Why Microsoft, With $100 Billion, Wants a Loan for LinkedIn

Microsoft Corp. has enough cash to buy LinkedIn Corp. four times over. So why is it taking out a big loan to pay for its latest purchase? Maybe because it’ll lower the technology giant’s tax bill.
Microsoft will avoid having to pay a 35 percent tax rate to repatriate cash from overseas accounts. While it’s true that Microsoft has more than $100 billion in cash and cash equivalents, most of it is parked offshore. Bringing home any of it to fund the proposed $26.2 billion purchase, announced on Monday, would generate a tax bill. That’s not the only benefit of borrowing. The company could also deduct interest payments, thus lowering its future U.S. tax bill. So by financing the bulk of its purchase with debt, Microsoft could legally sidestep roughly $9 billion in U.S. taxes this year, and save millions more in the years to come by using interest deductions to reduce its taxable income.