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.
Spouses can make unlimited gifts to each other.
How could the NBA prohibit her from owning the team? It'd be war on women.
If I remember contract clauses seeking to oust courts of jurisdiction are illegal. There could be an agreement to arbitrate before any filing in court or in lieu of judicial action. To put it another way arbitration clauses are legal. An arbitration would probably not do him any good. Secondly, not withstanding any contract provision to the contrary one can always raise constitutional issues. There have been lots of penalty clauses in contracts voided as unconscionable even under ordinary case law.
The way the NBA Constitution is written, the sanctions proceeding is an “arbitration,” with the Commissioner as the “arbitrator.” That wording is copied, I believe, from the Major League Baseball Agreement, where it has been upheld (but the only challenges to it were many years ago).
Given the current relationship between the two, that won't happen.
They're estranged, not divorced. He's the legal owner.
On HLN they were screaming about banning the entire family from basketball and calling him a monster.
Since the NBA gets to approve owners I guarantee that there will never be a Sterling involved with the Clippers again.
The NBA approves owners. They'll turn her down in an instant.
It's not the Government which is depriving him, it's the NBA, a private club whose rules he agreed to follow. Courts have almost invariably upheld the rights of Sports Commissioners to punish players, owners and coaches.
While I agree that what Sterling said was wrong, stupid and idiotic, it was not illegal. Not even close.
Who said it has to be illegal? The standard under the NBA Constitution is "conduct not in the best interest of professional basketball." Given the immediate loss by the Clippers of most of their sponsors when the Sterling tape was released, followed by a threatened players' boycott, Sterling's remarks were clearly not in the best interests of the NBA.
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).
What precedent would be set that wasn't previously set in the Marge Schott and George Steinbrenner cases?
Even under arbitration clauses a person is entitled to a hearing. I would consult a top lawyer on the theory that the penalty is out of proportion to the wrong. There was a 1993 case involving punitive damages or a penalty that the court, If I remember correctly said was wrong.
Agreed. That is Sterling's best argument.
I would consult a top lawyer
I'm sure he's already consulting several.
on the theory that the penalty is out of proportion to the wrong. There was a 1993 case involving punitive damages or a penalty that the court, If I remember correctly said was wrong.
The punitive damages cases are probably not going to help him here; the $2.5 million penalty is an amount specifically authorized by the NBA Constitution, and the ban on owning the team is arguably not a financial penalty at all, because he can sell it for a hefty profit. Sterling may well litigate this, but I doubt he will do any better than George Steinbrenner did when he sued to overturn the Commissioner of Baseball.
I think the NBA will have trouble with the wife. The wife should have Donald declared incompetent and take control of the team.
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