Add Tribune To Tax Trouble List

Zell's deal faces audit

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    NEWSLETTERS

    TK
    Getty Images
    The IRS has Tribune Company in its sights.

    Todd Stroger isn't the only public figure presiding over a financial mess who is in trouble with tax man these days. Todd, meet Sam Zell.

    The IRS is auditing a key - and controversial - component of Zell's purchase of the Tribune Company. Zell faces a potential catastrophe if the agency rules against him.

    "As much as $1.8 billion could be at stake," Crain's reports. "Under scrutiny is a $250-million purchase of Tribune shares in April 2007 by the company’s newly minted employee stock ownership plan. The ESOP was the first step in Mr. Zell’s privatization of the company."

    It was also a way for Zell to purchase the company with relatively little money of his own, leveraging the ESOP's assets instead.

    "IRS investigators are 'attempting to determine if the transaction was for the benefit of employees,' according to a declaration filed by a Waukesha, Wis.-based agent in charge of the probe," Crain's reports.

    If that's the standard, Zell and Tribune are in trouble.

    "Employee Benefit, Our Ass," says the Hartford Courant Alumni Association.

    Of course, the IRS may have a more technical way of defining "employee benefit" than workers laid off by the Zell regime.

    But still. Even Zell himself has said that buying Tribune was a mistake.

    Now we'll see just how big of a mistake. And who will pay for it.

    Steve Rhodes is the proprietor of The Beachwood Reporter, which curiously enough is not in bankruptcy like the Tribune, Sun-Times and Reader.