TRIBUNE MEDIA COMPANY f.k.a. TRIBUNE COMPANY & AFFILLIATES, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent CHICAGO BASEBALL HOLDINGS, LLC, NORTHSIDE ENTERTAINMENT HOLDINGS, LLC, f.k.a. RICKETTS ACQUISITION, LLC, TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent, T.C. Memo 2021-122

Summary

HOLDINGS: [1]-The sub debt was equity, not bona fide debt, for tax purposes because although the sub debt had the superficial appearance of bona fide debt, it more closely resembled equity where the intent of the parties, right to enforce payment, risk, identity of the interest, and use of the advance weighed significantly toward equity. Because the sub debt was equity, it could not be allocated to the media company as recourse debt; [2]-The $2.5 million expenses must be capitalized because whether the media company moved forward with the family or the group, the overall plan to create a new capital asset was the same and the media company paid the expenses in pursuit of this plan. Thus, no plan was ever abandoned, and the media company did not suffer abandonment losses.