By: Todd Shields Chicago's Tribune Co. says it will fight a federal demand for $790 million or more in back taxes and penalties stemming from transactions undertaken by Times Mirror Co. two years before it was bought by Tribune in 2000.
Times Mirror disposed of publishing subsidiaries in ways designed to mimic a tax-free merger. But the IRS last year ruled that such transactions are liable to taxation. The agency said Tribune Co. owes $600 million plus interest.
On July 22, the IRS told Tribune it would not seek a 20% penalty, the publishing company said in a quarterly filing with the Securities and Exchange Commission. The IRS also said it intends to litigate the matter, the Tribune said. "The company intends to vigorously defend its position in this litigation," Tribune said in the SEC filing. A Tribune Co. executive declined to elaborate.
As of June 30, the interest on the disputed taxes stood at $190 million, the Tribune said in its filing. It said the dispute had led it to create a $180 million reserve.
The transactions at issue include Times Mirror's disposal of law-products publisher Matthew Bender & Co., Inc., and Times Mirror's 50% share in legal-citation publisher Shepard's Co. The legal publishers went to Reed Elsevier PLC. Times Mirror reported a total gain of about $1 billion.
In a similar transaction later in 1998, Times Mirror sent legal publisher Mosby Inc., to Harcourt General Inc., in a deal that left it in control of a $432 million subsidiary. The IRS in July placed the deals' value at $1.6 billion, according to Tribune's federal filing.
Tribune spent $8 billion to buy Times Mirror, publisher of the
Los Angeles Times and other newspapers.
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