Steve Ballmer Paid $2 Billion For The Clippers, But He Might Get Half That Back In Tax Breaks

Business Insider ^ | 10/27/2014 | Myles Udland

[SeekAndFind]

Steve Ballmer paid $2 billion for the Los Angeles Clippers.

But a new report from the Financial Times said he might get about half of what he paid back in the form of tax benefits over the next 15 years.

Ballmer's purchase was a record for NBA franchises, coming at nearly four times the next-highest amount ever paid for an NBA team.

But the FT found that using a goodwill tax exemption allowed for sports teams, Ballmer could get back $1 billion in taxes.

Here's how the FT lays it out:

Under an exception in US law, buyers of sports franchises can use an accounting treatment known as goodwill against their other taxable income. This feature is commonly used by tax specialists to structure deals for sports teams. Goodwill is the difference between the purchase price of an asset and the actual cash and other fixed assets belonging to the team.

In this case, Mr Ballmer can spread the goodwill over 15 years and reduce his tax liability on his other income by a certain amount for each of those years.

[rdcbn]

Developers, Developers!

[RIghtwardHo]

So we are paying for half the Clippers? Do I get Season tickets? Ridiculous.

[SeekAndFind]

Ballmer knew about this tax break BEFORE he bought the team.

[Resolute Conservative]

Of course he will, while the rest of us continue to be yoked.

[TexasGator]

“Ballmer knew about this tax break BEFORE he bought the team.”

Professional sports have rigged the tax game for decades.

[coloradan]

The responsibility of rigging taxes lies solely on legislators, who corruptly hand out breaks to favored entities for personal reasons or in exchange for contributions. It's no accident that the tax code is thousands of pages long, and that the wealthy and elites can use breaks that the common people can't. Don't get mad at Ballmer (or GE, which has paid zero net taxes), get mad at Congress, state-level legislators and the IRS for making and enforcing the Byzantine sets of rules and regs they have created. The solution is to abolish the income tax altogether and replace it with a retail sales tax, and only a retail sales tax, which the rich and the poor alike would equally pay. (Noting that the poor can receive transfer payments to lessen their tax burden, if required.)

[Attention Surplus Disorder]

I myself have no issue with folks taking advantage of tax breaks. They’re in the law, there’s no “overlooked lawbreaking” going on.

[dfwgator]

Democrats take care of each other.

[Defiant]

We’re not paying anything to Ballmer. We are taking less of his money at gunpoint. Stop looking at things from the vantage point of the marxists.

[dfwgator]

All we’re saying is to call the Democrats on their hypocrisy. Ballmer is a Rat who has given tons of money to the DNC. “You scratch my back, I scratch yours.”

[coloradan]

The issue I have with tax breaks is that they amount to a kind of coercive social microengineering (i.e. enforced at government gunpoint) which first, aren’t the business for a government of a free people to even attempt to do, and second, which are usually to the benefit of elites and cronies, at the expense of the rest of us. Suppose there’s a giant tax break for owning sports teams. Are you or I ever going to own a sports team? No, so such a break is exclusively for the benefit of multimillionaires and billionaires. And they don’t need the help of government, by which I mean, it is not ethical for government to help those people at the expense of people like us.

[coloradan]

Unless and until regular folks can also buy sports teams, this tax break amounts to a subsidy of multi-billionaires. As are all the other tax breaks. Why is the tax code thousands of pages long? Because corrupt legislators want to favor their cronies.

[C19fan]

Goodwill = Tax Break for overpaying for a sports team to satisfy your own vanity.

[coloradan]

In other words, your post presumes that the law is ethical, moral and just. It isn’t.

[Attention Surplus Disorder]

In principle I don’t disagree with you at all. I would point out, though, that “farther down the food chain” someone who viewed themselves as “never being able to afford a house” might have exactly the same view towards the home mortgage deduction. Or, someone who never thought of themselves as being able to start, run, and operate a simple business might well have scorn for those who can deduct the cost of their (business venue) rent and paper clips. Just sayin’.

At the same time, again in principle, I have some trouble saying that “we are paying for it”. Because the break issued to Mr. Ballmer (and a zillion others) reduces tax revenues, yes, correct. But I see the government as having no inherent claim on that revenue (other than their lawmaking ability), so it’s not “theirs” (in my view) except to the extent they can issue a claim on it.

We (you & I) would probably agree that government is too large, claims far too much tax revenue, and enforces many policies of highish taxation. We would like gov’t to tax (demand) less. Arguably, Ballmer’s buy of the team produces widespread economic benefits all over the place. But it is difficult to have an argument/discussion as to the benefits/detriments of this kind of tax break while imaginging dissolving the system under which and by which it works. Gov’t has to get *some* money to perform its mandated, Constitutional tasks, and to assist in roadbuilding to some degree, defense of course. I am making no kind of silly argument that taxes should be zero.

[Defiant]

It’s not limited to sports teams. It allows anyone buying a business to spread the cost of the goodwill over a period of years. Many businesses are purchased for 6 figures by regular people. Any tax break is a good tax break.

[Defiant]

I don’t think this is a democrat-focused tax break. It’s one that is available for anyone buying a business where part of the purchase price is attributable to goodwill. It’s a good idea, and it usually benefits much smaller businesses. I don’t know where it originated, but I would not be surprised if it is a Reagan-era tax break.

[Attention Surplus Disorder]

“In other words, your post presumes that the law is ethical, moral and just. It isn’t.”

I’m not making that argument at all. The law exists. Once the law exists, those who break it are lawbreakers and those who fail to enforce it are lawbreakers of a special type, this being the new trend under 0bama. But there are no consequences for those who fail or refuse to enforce the law. There is a probably smaller but not insignificant segment of people who obey “legislatively-passed” law but run afoul of administrative “law”. (It shouldn’t be called “law”, as pointed out by Prof. Philip Hamburger in last months Imprimis; it was not passed by the Consitutionally empowered method of lawmaking, it was a 4th-branch exercise and should thus be called “regulation” or some other term that is different then “law”) This is our modern paradigm, and I don’t get any comfort from it.

But those who follow the law, as written, are none of the above.