UPDATE 1-Tribune's tax status boosts quarterly income

(Adds details on ad revenue)

NEW YORK, May 8 (Reuters) - Tribune Co reported a huge boost in first-quarter earnings on Thursday because of tax advantages related to its status as an employee-owned company, but a drop in advertising revenue at its newspapers hurt its underlying results.

The privately-held publisher of the Los Angeles Times and Chicago Tribune reported earnings from continuing operations of $1.82 billion, compared with $11 million in the first quarter last year.

Operating revenue dropped 8 percent to $1.1 billion. Publishing revenue fell 11 percent to $823 million from last year, while the publishing unit's cash flow fell 56 percent to $80 million and operating profit declined 74 percent to $37 million.

"Print ad revenues continue to be challenged by the economy's impact on real estate and classified advertising," Chief Executive Sam Zell said in a statement. "Broadcasting operating results are notably more stable."

Tribune is looking to sell the Chicago Cubs, the Newsday newspaper and other properties as it tries to pay back billions of dollars in debt that it took on in an $8.2 billion buyout last year that was led by real estate tycoon Zell.

Restructuring the company as an employee-owned corporation lets it avoid large amounts of tax liability, but Tribune still has a series of interest and principal payments to make on its debt that might become harder to meet as its revenue falls.

Much of the fall comes from harmful effects on advertising sales from the housing market crisis, credit crunch and other economic woes. The housing trouble has been particularly acute in California, where Tribune owns the LA Times, as well as in Florida where it owns the Orlando Sentinel and South Florida Sun-Sentinel.

Publishing ad revenue fell 15 percent during the first quarter, which classified ad sales dropping 27 percent. Real estate classified sales fell nearly by half.

Online revenue, which most newspaper publishers are trying to grow to compensate for their print declines, was flat at Tribune's publishing business because of a decline in classified sales. (Reporting by Robert MacMillan, editing by Phil Berlowitz; editing by Carol Bishopric)