The Tribune Company faces a potential tax bill of more than $500 million over the sales of the Chicago Cubs and Newsday despite efforts to minimize both deals’ tax hits, the company disclosed on Monday.
In the footnotes of its financial report for last year, Tribune said that the Internal Revenue Service is seeking $190 million in taxes from the 2008 sale of Newsday to Cablevision as well as a $38 million “accuracy-related penalty†and $17 million in after-tax interest.
Tribune also disclosed that the I.R.S. may seek $225 million and unspecified penalties and interest for the company’s 2009 fiscal year, in which it sold the Cubs to the wealthy Ricketts family for $845 million. (The I.R.S. is expected to finish auditing the 2009 results this year.)
While Tribune is planning to challenge the I.R.S. ruling on the Newsday sale, a loss in that fight would leave the media company liable for an additional $28 million in state income taxes and interest through Dec. 30 of last year.
A spokesman for Tribune declined to comment.
If the I.R.S. rulings stand, Tribune will face a big financial penalty that it had not counted on. Both deals, struck while the billionaire investor Samuel Zell led the media company, were designed to shield Tribune from big tax bills.
Both deals were structured as partnerships, with Tribune contributing assets â€" Newsday in one deal, the Cubs in the other â€" in exchange for cash payouts and a small percentage of each partnership.
The approach was in line with Mr. Zell’s relationship to taxes from the beginning. The billionaire bought the media company in an unusual leveraged buyout that converted Tribune into an S corporation that pays no federal taxes.
News of the potential tax consequences was reported earlier on Tuesday by Fortune magazine.
