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McDONNELL DOUGLAS REACHES FINAL SETTLEMENT WITH IRS

 McDONNELL DOUGLAS REACHES FINAL SETTLEMENT WITH IRS
 ST. LOUIS, Dec. 2 /PRNewswire/ -- McDonnell Douglas (NYSE: MD)


has reached a final settlement with the Internal Revenue Service resolving longstanding tax issues.
 The settlement includes an agreement over the completion dates of a number of military aircraft contracts. It also includes agreement over allocations to goodwill from the acquisitions of Tymshare Inc. and Hughes Helicopter Co. in 1984. Under the settlement, McDonnell Douglas has already paid an additional $150 million to the IRS for the 1977-1985 period. In addition, the IRS has returned the stock of McDonnell Douglas Helicopter Co. which it had held as security pending resolution of the tax issues.
 McDonnell Douglas expects the settlement to have a net positive effect on fourth quarter earnings due to the reversal of over-accrued interest expenses. The corporation's earnings over the past three years have been reduced by interest expense accrued in anticipation of a settlement with the IRS. The fourth quarter results will show a reduction in over-accrued interest expense which more than offsets an increase in tax expense.
 There will be a substantial future obligation to be paid upon completion of IRS audits for the 1986-1989 period. In anticipation of that payment, which is expected in 1994, McDonnell Douglas will continue to accrue interest expense over the next three years -- but in lesser amounts than the interest accrued for taxes over the past three years.
 Approximately half of the corporation's $1.090 billion in deferred income tax liability as of Sept. 30, 1991, arises from the operations of McDonnell Douglas Finance Corp., and is unaffected by the settlement with the IRS. Like other tax-driven finance corporations, McDonnell Douglas Finance Corp. utilizes accelerated depreciation methods, which reduce current tax obligations and result in deferred income taxes. Payment of McDonnell Douglas Finance Corp.'s deferred tax liability will only occur in future years or upon the sale or disposition of the assets of the subsidiary.
 -0- 12/2/91
 /CONTACT: Andrew Wilson of McDonnell Douglas, 314-233-1038/
 (MD) CO: McDonnell Douglas Corporation; Internal Revenue Service ST: Missouri IN: ARO AIR SU:


CH -- LA006 -- 8289 12/02/91 10:57 EST
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Publication:PR Newswire
Date:Dec 2, 1991
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