In 2009, Tribune Media Company and the Ricketts family closed a transaction to transfer almost all of Tribune Media's interest in the Chicago Cubs baseball team in what was intended to be a tax-advantaged manner to a partnership controlled by the Ricketts family. A key element of the plan, necessary to permitting Tribune Media to defer taxation of the bulk of its gain, was for most of the funds invested by the Ricketts family to be characterized as "debt" for federal income tax purposes. In Tribune Media Co. v. Commissioner (TC Memo 2021-122), a recent decision discussed below, the Tax Court determined that the Ricketts investment, although documented as subordinated debt, was properly characterized as "equity" for tax purposes, such that the deferral sought by Tribune Media was unavailable.

Facts in 'Tribune Media'

Tribune Media Company, publisher of the Chicago Tribune newspaper, and its affiliates owned the Cubs baseball team. Beginning in 2007, Tribune Media began to explore the disposition of the Cubs as a non-core asset, a matter made more urgent by a leveraged buyout of Tribune Media (previously a public company) in 2007, financial pressures resulting from the buyout, and an economic downturn that resulted in a bankruptcy filing for the company.