                       T.C. Memo. 2006-12



                     UNITED STATES TAX COURT



   TRIBUNE COMPANY, AS AGENT OF AND SUCCESSOR BY MERGER TO THE
  FORMER THE TIMES MIRROR COMPANY, ITSELF AND ITS CONSOLIDATED
                    SUBSIDIARIES, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 17443-02.           Filed January 26, 2006.



     Joel V. Williamson, Roger J. Jones, Gary S. Colton, Jr.,

Jeffrey Allan Goldman, Matthew C. Houchens, Daniel A. Dumezich,

Patricia Anne Rexford, Andrew R. Roberson, Thomas Lee Kittle-

Kamp, Nathaniel Carden, and Monica Susana Melgarejo, for

petitioner.

     Alan Summers, Cathy A. Goodson, William A. McCarthy,

Usha Ravi, Robert H. Schorman, Jr., and Gretchen A. Kindel, for

respondent.
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                  SUPPLEMENTAL MEMORANDUM OPINION


     COHEN, Judge:    The supplemental opinion resolves the issue

left undecided by our opinion in Tribune Co. v. Commissioner, 125

T.C. 110 (2005) (the Bender opinion).     Pursuant to agreement of

the parties, the issue involving the so-called “Mosby

transaction” is submitted fully stipulated and decided on the

basis of the Bender opinion.   The findings of fact set forth in

the Bender opinion are incorporated herein by this reference as

if fully set forth.   Only those facts unique to the Mosby

transaction are included in this supplemental opinion.    Unless

otherwise indicated, all section references are to the Internal

Revenue Code in effect for the year in issue, and all Rule

references are to the Tax Court Rules of Practice and Procedure.

                             Background

     In 1998, in a transaction separate from but similar to the

Bender transaction, Times Mirror Co., Inc. (Times Mirror),

exchanged all of the outstanding stock of Mosby, Inc. (Mosby), in

the “Mosby transaction”.   Times Mirror used the “corporate joint

venture” structure to effectuate both the Bender and Mosby

transactions.   However, in contrast to the Bender transaction,

before Times Mirror transferred Mosby stock, Mosby distributed

certain assets to Times Mirror.

     Times Mirror treated the exchanges of the Bender and Mosby

stock as tax-free reorganizations within the meaning of section
                                - 3 -

368(a).    Respondent determined in the statutory notice of

deficiency that both the Bender and Mosby transactions were

taxable.    Petitioner asserts that the Bender and Mosby

transactions qualify for tax-free treatment as reverse triangular

mergers under section 368(a)(2)(E) or, alternatively, as “B”

reorganizations under section 368(a)(1)(B).    Substantially the

same reasons support petitioner’s position that the Bender and

Mosby exchanges qualify as tax-free reorganizations.

     Respondent’s reasons for disallowing tax-free treatment of

the Bender transaction are nearly identical to respondent’s

reasons for disallowing tax-free treatment of the Mosby

transaction.    As to the Mosby exchange only, respondent asserts

an additional reason to disqualify that transaction as a reverse

triangular merger.    Respondent contends that Mosby’s transfers of

assets to Times Mirror prior to Times Mirror’s transfers of Mosby

stock present an alternative and independent ground for finding

that the Mosby transaction did not meet the “substantially all”

requirement of section 368(a)(2)(E).

     In December 2004, the Bender transaction was tried.      The

parties agreed that, because of the similarities between the

Bender and Mosby transactions and the issues for trial, a trial

of the Bender transaction could obviate the need for or limit the

scope of any trial of the Mosby transaction.    The parties agreed

that, if the Bender transaction fails to qualify as a tax-free
                               - 4 -

reorganization because it is neither a reverse triangular merger

nor a “B” reorganization, the Mosby transaction also fails to

qualify as a tax-free reorganization.    On September 27, 2005, the

Court issued the Bender opinion, in which it found that the

Bender transaction does not qualify as a tax-free reorganization

within the meaning of section 368(a), because it was neither a

reverse triangular merger nor a “B” reorganization.

     The parties agree that the Bender opinion governs the

outcome of the Mosby issue at the trial level.    They agree that

any judicial determinations affecting the Bender opinion on

appeal or remand will also apply to the Mosby transaction.

     Times Mirror’s adjusted basis in its Mosby stock as of

October 9, 1998, was $166,307,272, which amount is greater than

the amount determined in the statutory notice of deficiency,

$161,290,641.   Times Mirror realized $415,000,000 in 1998 on the

exchange of its 100-percent common stock interest in Mosby, and

the additional capital gain resulting from Times Mirror’s

disposition of the Mosby stock is $248,692,728.

                            Discussion

     The parties have stipulated that, in accordance with the

Bender opinion and their stipulations and agreement, the Court

should find that the Mosby transaction does not qualify as a tax-

free reorganization within the meaning of section 368(a).    This

agreement avoids unnecessary time at trial and facilitates early
                              - 5 -

consideration of petitioner’s appeal.    The parties have not

asserted any additional arguments that need to be addressed.    In

order to give effect to the determinations in the Bender opinion

and the stipulation,


                                           Decision will be entered

                                      under Rule 155.
