- 8 -
received. Tracinda argues that the excess is $271,727,849. In
the revenue agent's report issued to TBS, respondent stated that
the UA Loss was $262,696,140. A loss on the disposition of UA in
the amount of $217,612,767 was claimed on TBS' 1986 consolidated
return. TBS now claims the UA Loss is in excess of $262 million.
The excess of basis is hereinafter referred to as the UA Loss.6
After ascertaining that MGM's basis in the UA stock
substantially exceeded the agreed sale price to Tracinda, the
parties entered into an Amended and Restated Agreement and Plan
of Merger dated January 15, 1986, between MGM, UA, TBS and
others, which provided for the possibility of the UA Loss in
clause 6.3(c):
If, however the sale of New UA [UA] results in a
Federal and/or State tax loss, the Company [MGM] shall
benefit therefrom; provided, however, that to the
extent the Purchaser [TBS] receives an actual tax
benefit on any of its post merger consolidated tax
returns as a result of such loss, the Company [MGM]
shall pay to New UA [UA] the first $12.5 million of
Federal and/or State tax benefits from the realization
of such loss.
The UA Loss was reported on the TBS Group's7 1986
consolidated tax return. In March 1989, Tracinda filed an
amended income tax return for the taxable year ending January 31,
6For purposes of these proceedings, respondent does not
agree to any specific amount.
7Unless otherwise specified, a reference to TBS Group is to
TBS and its consolidated subsidiaries.
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