Posted on 05/01/2014 2:25:40 PM PDT by Responsibility2nd
Could Sterling look to treating the sale as an involuntary conversion under Section 1033 of the tax code? Basically the code section allows in cases where property is compulsorily or involuntarily converted – the owner can have nonrecognition of gain if he/she purchases replacement property (assuming of equal value). The owner has basically two years after the close of the tax year in which the gain was made to buy replacement property.
Translation – Sterling could seek to claim that his property (ownership of the Clippers) was compulsorily or involuntarily converted (being forced to sell it by the NBA) under Section 1033. NOTE: the argument that Sterling had to sell because of his own actions – not the NBA’s – is a fair one and could be a possible IRS line of attack.
Sterling could then seek over the next two years to purchase like property – another sports team(s) of equal value. While Sterling is banned from the NBA there are many other sports teams out there (think European soccer teams) that he might look to purchase. Sterling’s argument would be that the Clippers are a professional sports team and he has bought another sports team – that he is not limited to just purchasing an NBA team.
The tax benefit for Sterling – transferred basis to the new sports team and deferral of capital gains taxes (ie will have to pay tax when he sells the soccer team down the road (or at death) – assuming no sharp pencils on estate tax planning). Bottom line – no tax bill today.
Slate, Why the NBA’s Punishment Could Cost Donald Sterling More Than $100 Million
Sports Illustrated, Important Tax Law Considerations: Avoiding Capital Gain Taxes
Vox, The $200 Million Reason Donald Sterling Doesn't Want to Sell the Clippers — Capital Gains Taxes
Washington Post, What Donald Sterling Could Make If He’s Forced to Sell the Clippers
Forbes, How Clipper's Sterling Could (Maybe) Avoid a Tax Bill Today:
100 Million? 200 Million?
The SI article suggests a much higher amount...
For instance, if he sold the Clippers today for $1 billion, Sterling would pay capital gain taxes of 33 percent on a gain of $987.5 million. As a result, Sterling would owe Federal & state capital gain taxes of approximately $329 million.
I hope he sues the NBA.
The NBA recently owned the Saint/Pelicans down there in Loozy-Anna.
If they are so intent on forcing Sterling out - then hey. Make him an offer. I’d sell for 1.5 billion. That’d pay the Capital Gains tax and I’d make a little profit off of my initial 12.5 million dollar purchase.
Heh heh heh....
I’ve heard that the team is actually owned by the Sterling Trust, which in turn is run by him, his estranged wife, and children.
His wife was suing the girl over gifts given her by Sterling. I wonder if the wife and children as part of the trust, would have to be involved in the sale.
So its a win-win-win for political correctness, lefty-buyers of the team, and Government!
Well, if he get’s some bleeding heart liberal buyers who pay double what they should, so what? He’ll still come out ahead.
The buyer’s will pay the taxes not him.
Sue baby sue.
For once we would have some interesting litigation.
Or if he can solve the supposed problem by transferring the team to his family. Then he no longer owns it, but his kids and (possibly estranged) wife do.
Be kinda funny if Clippers won the title...
For what he said he should have all he owns taken from him and be sent to prison for life. He is worse than Hitler.
On FOX they were saying that any forced sale would be difficult since in California the wife owns 50%. On HLN they were screaming about banning the entire family from basketball and calling him a monster. It was kind of funny for a while to watch the hysterical talking heads rave on HLN but soon it became boring.
The same section of the NBA Constitution which gives the Commissioner the power to sanction owners provides that the Commissioner's decision is final and cannot be reviewed in court. That would probably (but not definitely) be upheld if Sterling challenged it.
How do you figure that?
Then he'd pay gift tax on the transfer.
I may be all wet here, but I think that the courts are all going to have a tough time with this issue.
One of the legal tenants of our nation has always been that no man may be deprived of, ‘Life, Liberty or their property’ without due process.
While I agree that what Sterling said was wrong, stupid and idiotic, it was not illegal. Not even close.
It would probably be a good thing that Donald is no longer involved with the Clippers. Having said that, I believe that forcing him to sell the Clippers would set a very dangerous precedent(not so much a slippery slope, but more like skydiving without a parachute).
With one leg of our jurisprudence kicked out from under us, the other two would also eventually fall.
If the guy didn’t already have the team in a trust (and it could be that NBA rule prohibit such), he’s a dumba** and deserves any losses he incurs
There is a POLL on this page and it shows 75% think that the owner was dealt an raw handed over punishment
FREEP THIS POLL
The bleeding hearts may not follow their brains but their hearts and pay 2-3 times what he could normally get. He could walk away with more than a normal sale.
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