In the coming months, Bausch Health (BHC), a maker of eye health, gastroenterology, and dermatology products, plans to spin off its eye health segment, creating a pure play eye health firm to be called Bausch + Lomb. Bausch Health also plans to pursue an initial public offering of its Solta aesthetic medical device business. The remaining company will be named Bausch Pharma.

If Bausch, which has an enterprise value of approximately $32 billion, is successful in unlocking the value it perceives, the company will use a portion of the proceeds to pay down its $22 billion in long term debt. The headlines have been dominated by the spin and upcoming IPO. But a closer look reveals the company’s liabilities may be even greater.

In the footnotes of its latest 10-Q, Bausch detailed how a 2017 restructuring resulted in a capital loss, a portion of which was carried back to 2014. The filing indicates the IRS has been examining Bausch’s 2014-2017 tax returns and recently came to a conclusion:

“Recently, the Company has received a notice of proposed adjustment from the IRS that would disallow the 2017 capital loss.”

Though Bausch has not yet gotten a bill, it expects one soon and says it will appeal no matter the size of the IRS’s deficiency assessment. If the IRS disallows the entire loss Bausch created with the restructuring, it’s the equivalent of approximately 22.8% of the company’s market cap as of this writing:

“If the Company were ultimately unsuccessful in defending its position, and all or a substantial portion of the 2017 capital loss deduction were disallowed, the Company estimates, in a worst case scenario, that it could be liable for additional income taxes (excluding penalties and interest) of up to $2,100 million…”

The looming tax bill is not Bausch’s only albatross ahead of the corporate break up. Though it assures there are no safety concerns, Bausch recently recalled $14 million of contact lens cleaning solution over concerns bottles were not properly sterilized. The company fired the sanitization vendor in question and provided an assurance some might perceive as less than bankable:

“Although it is possible additional charges may be incurred, at this time we believe no additional charges will be necessary.”

With 4.37% of the float sold short, contrarians are betting Bausch’s three way break up unlocks more downside.