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Taxes Newsbeat

Friday, April 12, 2019

The IRS gives baseball teams a break

April 15 is quickly approaching so here’s one for all the tax nerds out there: the IRS issued new guidance today that will give professional sports teams some relief from a new twist presented by the tax law enacted in 2017.

The relevant provision related to how businesses are taxed on swapped assets, which included swaps of player contracts by professional sports teams. Under the old law, a swap of stuff of unequal value did not create a taxable event. So, if I traded a $50 piece of equipment for a $100 piece of equipment, I realized a $50 gain, but I was not taxed. Same went for me trading a contract worth $5 million for one worth $10 million. A trade of players did not create a taxable event for the Mudville Nine.

The 2017 law changed that, however. In the new law, only real estate swaps were not taxed. All other swaps of business assets are now taxed. Which is fine if you’re dealing with a printer or a metal stamper or something. It’s a little harder on a baseball player contract because how does one really value a $10 million contract? What if it’s for a player who sucks? What if it’s a sharply team-friendly contract for a much more valuable bit of control on a star player? Kind of a mess.

Given how much of our discussion of baseball ties with finances in one way or another, felt this of interest in describing how tax code affects decision-making.

 

QLE Posted: April 12, 2019 at 08:21 AM | 7 comment(s)
  Beats: irs, taxes, trades

Saturday, March 09, 2019

LA Times: Bryce Harper Will Save Tens Of Millions In Taxes By Spurning Dodgers & Giants

For Major League Baseball players, three teams are at the bottom of the standings on state taxes: the Los Angeles Dodgers, San Diego Padres and San Francisco Giants. That’s because California is in a league of its own on personal income taxes. We’ve got by far the highest state rate in the nation, topping out at 13.3%.

By contrast, Pennsylvania has a low flat rate for every taxpayer regardless of income. It’s just 3.07%. That’s one reason why superstar slugger Bryce Harper signed an eye-popping 13-year, $330-million contract last week with the Philadelphia Phillies, spurning the Dodgers and Giants.
.  .  .
Harper will save tens of millions in taxes by signing with the Phillies instead of a California team. “With a contract of that magnitude, it’s dramatic,” Scott Boras, Harper’s agent, says of the taxes. “It could be almost a full year’s compensation.” .  .  . Boras notes that Harper got $30 million more than Machado, but calculates that when all taxes are figured, the new Phillies player will net around $55 million more.


 

 

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