Tribune Co. v. Comm'r of Internal Revenue, No. 17443092.
| Citation | 125 T.C. No. 8,125 T.C. 110 |
| Decision Date | 27 September 2005 |
| Docket Number | No. 17443092. |
| Parties | TRIBUNE COMPANY, as Agent of and Successor by Merger to the Former the Times Mirror Company, Itself and its Consolidated Subsidiaries, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | United States Tax Court |
OPINION TEXT STARTS HERE
In 1998, Times Mirror's investment subsidiary, TMD, divested itself of a legal publishing business through the Bender transaction. The transaction was intended and designed to qualify as a tax-free reorganization under sec. 368, I.R.C. R determined that the transaction was a taxable sale by TMD to Reed. Held: The primary consideration received in the transaction was control over $1.375 billion paid by Reed. Held, further, the Bender transaction did not qualify as a tax-free reorganization because the terms and provisions of the contractual documents, as interpreted and implemented by Times Mirror and Reed, effected a sale.
Joel V. Williamson, Roger J. Jones, Gary S. Colton, Jr., Jeffrey Allan Goldman, Matthew C. Houchens, Daniel A. Dumezich, Patricia Anne Yurchak, Andrew R. Roberson, Thomas Lee Kittle–Kamp, Nathaniel Carden, and Monica Susana Melgarejo, for petitioner.
Alan Summers, Cathy A. Goodson, William A. McCarthy, Usha Ravi, Robert H. Schorman, Jr., Gretchen A. Kindel and M. Kendall Williams, for respondent.
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¦CONTENTS ¦
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¦FINDINGS OF FACT ¦5 ¦
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¦Background ¦5 ¦
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¦A. Times Mirror ¦5 ¦
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¦B. Changes in the Legal Publishing Landscape ¦6 ¦
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¦Events Leading Up to the Bender Transaction ¦7 ¦
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¦A. November 7, 1997, GS Presentation ¦7 ¦
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¦B. November 17, 1997, Special Meeting of Times Mirror's Board of ¦8 ¦
¦Directors ¦ ¦
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¦C. Times Mirror's Announcement Sparks Interest by Reed and Wolters Kluwer¦10 ¦
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¦D. February 5, 1998, Regular Meeting of Times Mirror's Board of Directors¦11 ¦
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¦E. March 5, 1998, Regular Meeting of Times Mirror's Board of Directors ¦14 ¦
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¦F. Reed and Wolters Kluwer Call Off Merger ¦15 ¦
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¦G. Melone, Sigler, and Walker Gain Access to the “Domestic Sandwich” ¦15 ¦
¦Structure ¦ ¦
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¦H. Reed and Wolters Kluwer Submit Preliminary Interest Letters to Times ¦16 ¦
¦Mirror ¦ ¦
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¦I. The Corporate Joint Venture Structure Is Tabbed as the Structure of ¦17 ¦
¦Choice for the Bender Transaction ¦ ¦
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¦J. April 14, 1998, Regular Meeting of Reed's Board of Directors ¦18 ¦
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¦K. Wolters Kluwer and Reed Attend Times Mirror's Presentations Regarding ¦18 ¦
¦Bender ¦ ¦
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¦L. Wolters Kluwer and Reed Submit Offers to Times Mirror ¦22 ¦
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¦M. Times Mirror Responds to Wolters Kluwer's Offer ¦23 ¦
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¦N. April 24, 1998, Special Meeting of Times Mirror's Board of Directors ¦24 ¦
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¦O. Organization of CBM Acquisition Parent Co. and CBM MergerSub Corp ¦26 ¦
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¦P. Adoption of the Merger Agreement ¦28 ¦
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¦Q. GS Prepares “Fairness Package” for Bender Transaction ¦34 ¦
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¦R. Melone Drafts Memorandum Regarding the Bender Transaction for E & Y's ¦35 ¦
¦Files ¦ ¦
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¦S. May 7, 1998, Regular Meeting of Times Mirror's Board of Directors ¦37 ¦
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¦T. May 7, 1998, Annual Meeting of Times Mirror's Shareholders ¦37 ¦
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¦U. Organization of Liberty Bell I ¦38 ¦
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¦V. July 9, 1998, Regular Meeting of Times Mirror's Board of Directors ¦38 ¦
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¦W. Execution of the LBI Limited Liability Company Agreement (the ¦42 ¦
¦management authority) ¦ ¦
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¦X. Execution of MB Parent Stockholders Agreement and the MergerSub ¦50 ¦
¦Shareholders Agreement ¦ ¦
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¦Y. Filing of the Restated Certificates of Incorporation for MB Parent and¦55 ¦
¦MergerSub ¦ ¦
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¦The Mechanics of the Bender Transaction ¦72 ¦
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¦A. Capitalization of MergerSub and MB Parent ¦72 ¦
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¦B. Merger of MergerSub and Bender ¦74 ¦
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¦C. Capitalization of LBI (the LLC) ¦75 ¦
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¦D. Closing ¦76 ¦
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¦Times Mirror's Management of LBI and the Development of Times Mirror's ¦76 ¦
¦Investment Strategy Following the Closing of the Bender Transaction ¦ ¦
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¦Summary of the LLC's Investment Activity During 1999 ¦87 ¦
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¦Times Mirror's and MB Parent's Income Tax Returns for 1998 ¦87 ¦
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¦Times Mirror's Financial Reporting Following the Close of the Bender ¦89 ¦
¦Transaction ¦ ¦
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Tribune Company v. Commissioner, Docket No. 17443-02.
...MEMORANDUM OPINION COHEN, Judge. The supplemental opinion resolves the issue left undecided by our opinion in Tribune Co. v. Commissioner, 125 T.C. 110 (2005) (the Bender opinion). Pursuant to agreement of the parties, the issue involving the so-called "Mosby transaction" is submitted fully......