SEC Filings

S-4/A
TIME WARNER INC. filed this Form S-4/A on 03/24/2000
Entire Document
 
<PAGE>
 
and, as a result, there can be no assurance that the Internal Revenue Service
will not disagree with or challenge any of the conclusions described below.
   
   Simpson Thacher & Bartlett, counsel to America Online, has delivered its
opinion to America Online and Cravath, Swaine & Moore, counsel to Time Warner,
has delivered its opinion to Time Warner to the effect that, on the basis of
the facts, representations and assumptions set forth in such opinion:     
     
  .  the merger of America Online Merger Sub into America Online and the
     merger of Time Warner Merger Sub into Time Warner will each constitute
     an exchange to which Section 351 of the Internal Revenue Code applies or
     a reorganization within the meaning of Section 368(a) of the Internal
     Revenue Code, or both;     
            
  .  no gain or loss will be recognized by AOL Time Warner, America Online,
     Time Warner, America Online Merger Sub or Time Warner Merger Sub as a
     result of the merger;     
     
  .  no gain or loss will be recognized by:     
       
    .  U.S. Holders of America Online common stock on the exchange of their
       America Online common stock for AOL Time Warner common stock; or
              
    .  U.S. Holders of Time Warner capital stock on the exchange of their
       Time Warner capital stock for AOL Time Warner capital stock, except
       with respect to cash received by U.S. Holders of Time Warner capital
       stock in lieu of fractional shares of AOL Time Warner capital stock;
              
  .  the aggregate adjusted basis of the AOL Time Warner common stock
     received in the merger by:     
       
    .  a U.S. Holder of America Online common stock will be equal to the
       aggregate adjusted basis of the U.S. Holder's America Online common
       stock exchanged for that AOL Time Warner common stock; and     
       
    .  a U.S. Holder of Time Warner capital stock will be equal to the
       aggregate adjusted basis of the U.S. Holder's Time Warner capital
       stock exchanged for that AOL Time Warner capital stock reduced by
       any amount allocable to the fractional share interests in AOL Time
       Warner capital stock for which cash is received; and     
     
  .  the holding period of the AOL Time Warner common stock received in the
     merger by:     
       
    .  a U.S. Holder of America Online common stock will include the
       holding period of the U.S. Holder's America Online common stock
       exchanged for that AOL Time Warner common stock; and     
       
    .  a U.S. Holder of Time Warner capital stock will include the holding
       period of the U.S. Holder's Time Warner capital stock exchanged for
       that AOL Time Warner capital stock.     
   
   Copies of these opinions are attached as exhibits 8.1 and 8.2 to the
registration statement of which this proxy statement-prospectus forms a part.
Any change in currently applicable law, which may or may not be retroactive, or
failure of any factual representations or assumptions to be true, correct and
complete in all material respects, could affect the continuing validity of the
Simpson tax opinion and the Cravath tax opinion.     
 
   Cash Instead of Fractional Shares. The receipt of cash instead of a
fractional share of AOL Time Warner capital stock by a U.S. Holder of Time
Warner capital stock will result in taxable gain or loss to such U.S. Holder
for U.S. federal income tax purposes based upon the difference between the
amount of cash received by such U.S. Holder and the U.S. Holder's adjusted tax
basis in the fractional share as set forth above. The gain or loss will
constitute capital gain or loss and will constitute long-term capital gain or
loss if the U.S. Holder's holding period is greater than 12 months as of the
date of the merger. For non-corporate U.S. Holders, this long-term capital gain
generally will be taxed at a maximum U.S. federal income tax rate of 20%. The
deductibility of capital losses is subject to limitations.
 
                                       60