WarnerMedia-Discovery merger obtains “favorable” IRS rating
The Dallas-based telecommunications company reported on the decision in a regulatory filing released on December 29. After announcing the deal in May, the companies began a multi-step process known as the Reverse Morris Trust, which allows AT&T and its partner to complete the process without incurring capital gains taxes.
“On December 28, 2021, the company received a favorable private letter from the IRS regarding the qualification of the contribution of the WarnerMedia business to SpinCo under the separation, distribution and certain related transactions for their intended tax treatments. “, AT&T reported on the record.
Following the transaction, AT&T plans to separate New York-based WarnerMedia from its other interests for the merger with New York-based Discovery.
In order to ensure that the transaction is tax-exempt, AT&T shareholders must retain a controlling interest in the new merged entity to demonstrate to the IRS that no capital gain has been realized as a result of the transaction. sale.
Under the terms of the deal, AT&T shareholders will control 71% of the new company and Discovery shareholders will own the remaining 29%.
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