Turner Broadcasting System, Inc. and Subsidiaries - Page 8

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          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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