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WarnerMedia-Discovery Merger Gets ‘Favorable’ IRS Rating

AT&T Inc. was given a “favorable” ruling by the Internal Revenue Service for the planned merger of its entertainment company WarnerMedia with television conglomerate Discovery Inc.
 
The Dallas-based telecommunications company reported the ruling in a regulatory filing released Dec. 29. After announcing the deal in May, the companies began a multistep process known as a Reverse Morris Trust, which enables AT&T and its partner to complete the process without incurring capital gains taxes.

 
“On Dec. 28, 2021, the company received a favorable private letter ruling from the IRS regarding the qualification of the contribution of the WarnerMedia business to SpinCo pursuant to the separation, the distribution and certain related transactions for their intended tax treatments,” AT&T reported in the filing.


As a result of the transaction, AT&T plans to separate New York-based WarnerMedia from its other holdings for the merger with New York-based Discovery.
In order to guarantee the deal is tax-free, AT&T’s shareholders must retain a majority stake in the newly merged entity to demonstrate to the IRS that no capital gains occurred as a result of the sale.

 
Per the terms of the deal, AT&T stockholders will control 71% of the new company, and Discovery’s stockholders will own the other 29%. 

Todd Gilchrist
Todd Gilchrist
Todd Gilchrist is a Los Angeles-based reporter and film critic with 20+ years of experience at dozens of print and online outlets, including Variety, The Hollywood Reporter, Entertainment Weekly and Fangoria. An obsessive soundtrack collector, sneaker aficionado and member of the Los Angeles Film Critics Association, Todd currently lives in Silverlake, California with his amazing wife Julie, two cats Beatrix and Biscuit, and several thousand books, vinyl records and Blu-rays.
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