The US Internal Revenue Service has ruled that shareholders in the media company Belo Corp. will not have to pay taxes on new stock they receive when the company spins-off into two entities.
Belo Corp. announced recently that it had received a private letter ruling from the IRS confirming that the previously announced decision to spin off the company's newspaper businesses and related assets will qualify as a tax-free distribution to Belo shareholders for US federal income tax purposes.
However, according to a filing with the Securities and Exchange Commission, Belo will owe USD18 million in federal income taxes, as well as a state tax, on the gain.
The spin-off transaction is scheduled to close on the distribution date, 8th February, 2008.
As noted in a Belo press release issued on December 4, 2007, the company is engaged in performing its annual impairment testing of goodwill and other intangible assets, using the methodology prescribed by Statement of Financial Accounting Standards No. 142.
The testing is nearing completion, and the company continues to expect to record a non-cash impairment charge for the fourth quarter of 2007. While the charge is expected to be significant from a reported GAAP earnings perspective, it will be a non-cash charge, and will not affect the Company's liquidity, cash flows from operating activities or debt covenants, or have any impact on future operations.
Belo owns 20 television stations, six of which are in the 15 largest US broadcast markets. The company also owns or operates six cable news stations, and manages one television station through a local marketing agreement. Belo's daily newspapers include The Dallas Morning News, The Providence Journal, The Press-Enterprise (Riverside, CA) and the Denton Record-Chronicle (Denton, TX).
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