Motorola Faces Possible $500 Million Tax Bill

Transfer-pricing snag could slam mobile phone maker.
Stephen TaubAugust 12, 2004

Motorola Inc. may owe Uncle Sam an added $500 million in taxes now that the Internal Revenue Service (IRS) has completed an audit of its returns for 1996 to 2000. The adjustments are primarily related to transfer pricing, which could result in $1.4 billion more income for the $34-billion manufacturer.

Motorola executives asserted that they disagree with the proposed adjustments and intend to vigorously dispute the matter, according to securities filings. The IRS, however, may make similar claims for years after 2000 in future audits, company officials added.

The company also warned that an unfavorable resolution of the issue could have a material adverse effect on the its consolidated financial position, liquidity, or results of operations in the period in which the matter is ultimately resolved.

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