TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, July 11, 2013

NY Times: Tribune Spinoff Will Save $250 Million in Taxes

TribuneNew York Times, To Cut Taxes, Tribune Is to Split Into Broadcasting and Publishing Units:

The Tribune Company’s decision to divide itself into separate broadcast and publishing companies may help avoid a big tax bill, but the split does not address the bigger problem facing newspaper executives: buyers just do not want to spend on print.

Months after Tribune announced it was exploring opportunities for its newspapers, including The Los Angeles Times and The Chicago Tribune, the company instead said on Wednesday that it would spin them off into a separate entity called the Tribune Publishing Company. In doing so, Tribune followed the example of Time Warner and News Corporation, which also recently announced spinoffs of their publishing businesses, even though print properties are the backbone of their companies. ...

By spinning off the newspapers instead of selling them, Tribune avoids the tax consequences of a sale in the near term while still allowing the company, now led by Peter Liguori, a longtime broadcasting executive, to focus its efforts on television, including 19 local stations that it acquired for $2.7 billion at the beginning of the month. ...

Robert Willens, a longtime tax analyst who runs the firm Robert Willens L.L.C., said that Tribune could avoid roughly $250 million in taxes on the sale of its newspapers, which have been valued at roughly $623 million, by creating a separate company. He added that for the deal to pass muster with the IRS, Tribune just has to show that it has not had discussions over price with potential buyers for two years before the creation of the new company.

“People do spinoffs all the time for the purpose of avoiding taxes,” said Mr. Willens. “That’s the beauty of a spinoff. It permanently avoids the tax that would be payable on a more straightforward or conventional disposal of the business.”

The company, he noted, is already grappling with a $190 million tax bill, plus 20 percent penalty, on its sale of the Long Island newspaper Newsday to Cablevision in 2008. In its most recent earnings report, Tribune Company said that it also might have to pay an extra $225 million in taxes after the IRS finishes auditing the company’s 2009 tax return over a sale of the Chicago Cubs baseball team.

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