IRS Seeks $1.5 Bln in Taxes from Vivendi
Monday August 25, 1:13 pm ET
PARIS (Reuters) - French-American media group Vivendi Universal said on Monday that U.S. tax authorities were seeking additional taxes of $1.5 billion plus interest connected to a 1995 sale of stock in chemical firm Dupont.
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Vivendi said the U.S. Internal Revenue Service had notified it on August 21 that it was challenging the tax treatment reported on the share sale by Seagram, the Canadian media-to-drinks group that Vivendi acquired in 2000.
"Vivendi Universal continues to believe that the tax treatment is fully compliant with U.S. tax laws in force at the time," Vivendi said.
The announcement comes a day before a Vivendi board meeting set to narrow down the field of contenders for the purchase of its U.S. show business empire -- the same assets it won when it acquired Seagram roughly three years ago.
The company said it believed the dispute could be resolved so as not to have a material adverse effect on its financial statements.
"Vivendi Universal believes that it has adequately reserved in its financial statements with respect to such matter," it said.
The company had said in April it was confident the dispute surrounding Dupont's redemption of 156 million of its shares from Seagram would be resolved without significant financial cost.
Dupont redeemed the shares from Seagram in April 1995. The resulting proceeds of $8.8 billion were treated as a taxable dividend, with 80 percent of that reported as an income tax deduction. Taxes on the remaining 20 percent of the money were paid in 1995, Vivendi said.
Under tax law at the time, Seagram recorded a $1.5 billion deferred tax liability related to the income tax deduction. This would not be paid until Seagram sold its Dupont stock.
Vivendi said in April if the Dupont transaction had taken the form of a sale or an exchange instead of a dividend, an additional $1.5 billion in taxes would have been paid in 1995.
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