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1991, HealthTrust issued to HCAII approximately 11 percent of
Common Stock upon the exercise by HCAII of a portion of its
Common Stock Warrants. HCAII used a portion of its Preferred
Stock to pay the Warrant exercise price. Additionally, pursuant
to that agreement, HealthTrust redeemed the remaining Securities
held by HCAII for $600 million in cash.
Treatment of Sale on HCA Consolidated Returns
On the consolidated returns for tax years ended 1987 and
1988,4 petitioners reported long-term capital gains from the sale
by HCAII of the stock of the Subsidiaries and the sale of the
HealthTrust Common Stock in the amount of $292,086,908 and
$20,436,509, respectively. In calculating the sales price of the
stock of the Subsidiaries, petitioners reported cash received
from HealthTrust in the amount of $855,164,281 and bridge loan
assumed by HealthTrust in the amount of $729,236,296 (i.e.,
$777,041,795 bridge loan reported assumed by HealthTrust and the
Subsidiaries less $47,805,499 reported assumed by the
4 Because of a lawsuit pending during 1987 relating to one of
the Hospitals acquired by HealthTrust, the parties to the
Acquisition placed in escrow $26,861,582 of the purchase price,
consisting of cash in the amount of $22,888,683 and 129,116
shares of class A preferred stock valued by HCA in the amount of
$3,972,899. During 1988, following settlement of that lawsuit,
the sale of the Hospital was finalized, and the escrowed funds
were released to HCAII.
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