Wed Aug 11, 2004

NEW YORK, Aug 11 (Reuters) - Motorola Inc., the world's No. 2 mobile phone maker, might have to pay $500 million in additional taxes after the U.S. tax authority questioned its returns for 1996 to 2000, Motorola said on Wednesday in a filing.

Motorola said it intends to dispute the adjustments proposed by the U.S. Internal Revenue Service (IRS) that could result in additional income of $1.4 billion for the period that would raise its tax liability.

Motorola said the proposed changes related to transfer pricing and noted that the IRS could make similar claims for the years following 2000 in future audits.

Motorola shares fell 72 cents, or 4.8 percent, to $14.42 on the New York Stock Exchange.

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