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BURBANK, Calif. (AP) _ The Internal Revenue Service is auditing the tax returns of The Walt Disney Co., the entertainment giant disclosed Wednesday in its quarterly report filed with the Securities and Exchange Commission.

Disney said the IRS is examining returns from 1993 through 1995 and that auditors have indicated they will challenge ``certain of the company's tax positions.''

The company believes its handling of tax matters was proper and intends to defend any challenges.

Disney warned investors, however, that the ultimate disposition of the challenge could result in the company having to make additional tax payments.

The company said it has provided for such payments and does not expect any future tax liability to reduce the company's earnings.

In afternoon trading on the New York Stock Exchange, Disney shares were down 8 cents at $24.32.

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