By Steven ChurchBloomberg
U.S. tax officials oppose Tribune Co.’s reorganization plan, arguing it would stop them from collecting potential taxes related to the bankrupt newspaper publisher’s 2007 buyout.
The U.S. Labor Department is investigating the tax implications of the $8.3 billion buyout, the Internal Revenue Service said in an objection filed today in U.S. Bankruptcy Court in Wilmington, Delaware. Should that probe determine Tribune owes taxes related to the buyout, the IRS would be barred from collecting them because of the legal releases contained in the plan, U.S. government attorneys wrote.
Creditors are split over the reorganization plan, with some arguing it shouldn’t settle allegations about the legality of the buyout and others in favor.
Bankruptcy examiner Kenneth N. Klee found evidence of a fraudulent transfer involving the second part of the two-part deal that real-estate billionaire Sam Zell used to take over the newspaper and television company. Klee found that creditors are “somewhat likely” to win a lawsuit based on the smaller portion of the $8.3 billion transaction.
Tribune filed for bankruptcy in December 2008, a year after the Zell-led buyout. Creditors have said in court papers that Klee’s report may influence the way they vote on Tribune’s reorganization plan. U.S. Bankruptcy Court Judge Kevin J. Carey in Wilmington, Delaware must take those votes into consideration when he decides whether to approve the reorganization plan and allow the company to exit bankruptcy.
The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net.
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