111 T.C. No. 18
UNITED STATES TAX COURT
TURNER BROADCASTING SYSTEM, INC. AND SUBSIDIARIES, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
TRACINDA CORPORATION, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 13977-96, 14786-96. Filed December 23, 1998.
Ps (TBS and Tracinda) and others engaged in a
series of complex commercial transactions that closed
simultaneously. TBS acquired a publicly held and
traded company (MGM) by way of a reverse triangular
subsidiary merger. At the same time as the acquisition
by merger, MGM transferred all the shares in its wholly
owned subsidiary (UA) to one of its former
shareholders, Tracinda. Tracinda then sold some of the
UA shares to former shareholders of MGM pursuant to a
prospectus and subscription agreement, which was
contemplated in the initial agreement. The
consideration received by MGM for the UA shares was
less than MGM's basis in those shares (UA Loss). Both
Ps claim a tax consequence from the sale of the UA
shares. TBS claims the loss was recognized by MGM and
is available to the TBS Group. Immediately prior to
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