Vivendi Universal said Wednesday that a tax dispute involving the sale of DuPont stock eight years ago is under appeal at the Internal Revenue Service and that a resolution won’t have a material adverse affect on its finances.
At issue are $1.5 billion in taxes possibly owed from the sale of $8.8 billion of DuPont stock by Seagram. The issue has been well documented and reappeared again this week in a routine Securities & Exchange Commission filing. But it represents another potential liability lurking in the French conglom’s fine print, even as Vivendi U seeks to tidy up its financial house and pay down substantial debt. It is contemplating a hefty tax payout to Barry Diller if its breaks up Vivendi Universal Entertainment.
Seagram, which Vivendi acquired in 1999, treated the hefty proceeds as a taxable dividend. Under current accounting rules, it only paid taxes on 20% of the total, generating some controversy at the time with 80% considered tax deductible. An additional $1.5 billion would have been owned if the transaction was treated as a sale or exchange, instead of a tax dividend.
“Vivendi Universal’s position is that the tax treatment is fully compliant (with) U.S. tax laws in force at the time,” the company said.
Investors shrugged off the issue, pushing Vivendi U stock higher in an upbeat market. Shares rose 2.26% to $14.04.