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Steve Ballmer Gets Billion-Dollar Tax Write-Off For Being Basketball Baron

Posted by samzenpus on from the write-it-off dept.

McGruber (1417641) writes "According to a report published by The Financial Times (paywalled), ex-Microsoft CEO Billionaire Steve Ballmer will be able to write off about a billion dollars of his basketball team's purchase price from the taxable income he makes over the next 15 years. "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."

11 of 255 comments (clear)

  1. So the taxpayer pays for overage, got it by RichMan · · Score: 5, Interesting

    So when someone buys a team at overvalue, the regular tax payer is on the hook for that overvalue.

    Nice deal the rich have going, getting someone else to pay their bills.

    1. Re:So the taxpayer pays for overage, got it by Overzeetop · · Score: 5, Interesting

      Yeah, we wish...

      http://www.forbes.com/sites/ro...

      --
      Is it just my observation, or are there way too many stupid people in the world?
    2. Re:So the taxpayer pays for overage, got it by ganjadude · · Score: 3, Interesting

      if the team was not sold, would there be any tax revenue??? no. its still a net gain for the government (the same government who uses that money to abuse americans and people abroad)

      Can we PLEASE stop acting like letting people keep their own money is somehow the same as the tax payers giving money to "the ev0l rich"???

      --
      have you seen my sig? there are many others like it but none that are the same
    3. Re:So the taxpayer pays for overage, got it by Anonymous Coward · · Score: 1, Interesting

      Last I checked we dont get to lobby for special tax exemptions for ourselves.
      The Waltons famously reduced their state tax burden by 3 million dollars by spending about 100k on lobbying.

      They deserve all the deominzation they get.

    4. Re:So the taxpayer pays for overage, got it by aaarrrgggh · · Score: 3, Interesting

      No, not really. There are a few bad exceptions (Hollywood accounting comes to mind), but on the whole the system is designed reasonably fair. Specific tax credits (not deductions) are a problem, but it is all designed around the complexities of the tax code. Simplifying the tax code isn't easy.

      Simple example: my wife has her own business, and makes less than $50k from it. Almost all that money goes into her 401k. She takes a minimal salary ($20k per year, of which $17.5k goes to her 401k, $2.5k goes to payroll taxes, and $2k goes to employment taxes). Everything else goes into her 401k, and we live off of my salary. This arrangement cost $400 to set up, and $250 per year in accounting, and saves us about $20k in taxes. (More importantly though it helps her build her retirement account which was non-existent 4 years ago.)

      I also know several teachers that use real-estate tax benefits to fund their retirement or kid's college, taking advantage of the tax write-offs there.

      The one thing I really wish would be different is that the IRS didn't tax retained earnings in small businesses. This is economically crippling and makes for poor business decisions busy not building sufficient reserves. However, if they did this it would make abuse significantly worse as it would allow a small business to choose when and how much taxes they pay.

      If you want to learn about how to minimize your tax liability, read a book or hire an expert. The book can get you 90% of the way there. The one I read was something like "tax write offs of the rich" for $20. It wasn't anything revolutionary, but it makes you think about how you leverage your money. It had some terrible advice (in the post housing bust mindset), but you need to understand the implications of your actions and not just expect a magic formula to make you wealthy/happy/healthy/whatever.

    5. Re:So the taxpayer pays for overage, got it by swillden · · Score: 5, Interesting

      So when someone buys a team at overvalue, the regular tax payer is on the hook for that overvalue.

      I don't think you understand what "deduction" means. It doesn't mean that Ballmer gets to recover his billion dollars from taxpayers, it just means that he doesn't have to pay taxes on that much of his capital gains income. Essentially, they're treating this as a bad investment on which Ballmer has taken a billion-dollar loss. In any investments you pay taxes on gains, but you get to deduct any losses against those gains.

      In this case, it's actually an asset depreciation, not an actual loss... but those details don't really matter.

      Note that the other side of this is that if Ballmer turns around in a few years and sells the team for exactly what he bought it for, any portion of the original value which he has claimed as a loss (depreciated away), but which he then recovers in the sale becomes a new capital gain. Basically, if the buys for $2B, argues that $1B of that was a loss and offsets it against other gains (using all of the $1B) then sells for $2B, the IRS will say "You bought for $1B and sold for $2B, so you have to pay capital gains on $1B".

      There are lots of actual loopholes out there, but this isn't really one of them.

      --
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  2. Misleading- Good will is common accounting by cbelt3 · · Score: 5, Interesting

    The implied assumption in the article and in the commentary indicates a deliberate misdirection or a simple understanding of the accounting principles involved in how a business accounts for a BAD DECISION. Every business has the ability to use this 'loophole'. But it's not a 'loophole'. It's a simple recognition that a capital purchase that turns out to not be a good deal should have the loss (cost of the purchase price minus the fair market value of the asset) amortized over the book life of the asset against the income produced by the asset.

    Kids, this is basic accounting 301 (Intermediate management accounting). Most accountants will tell you that having good will on your books means you made a dumb decision at some point, and paid more than something was worth. The title SHOULD read:

    "Ballmer pays twice what Basketball team is worse, can't write it off immediately, has to wait 15 years."

    1. Re:Misleading- Good will is common accounting by laughingskeptic · · Score: 3, Interesting

      Accountants from the 1970s will tell you that having good will on your books means you made a dumb decision at some point. Modern accounting practice is to assign as much value of a major purchase as possible to 'Good Will' because of the associated write off. If you review the fortune 100's annual filings you will find them full of purchases of lesser companies where the majority of the value of the purchase was assigned to 'Good Will'. Since the IRS takes 'Good Will' assignment at face value, why wouldn't you take as big of a write off as possible if you are a business spending money?

  3. Re:If you tax the rich, they'll leave by NotDrWho · · Score: 5, Interesting

    I'm just glad that we poor people can do our part in giving more money to rich guys so they can create more jobs and such. It's like Jesus said "Given unto the rich so they may beget to the poor."

    --
    SJW's don't eliminate discrimination. They just expropriate it for themselves.
  4. Re:If you tax the rich, they'll leave by Culture20 · · Score: 5, Interesting

    You don't get taxed based on your net worth; it's "income tax" for a reason. How much taxable income does he receive a year (not counting this tax break)?

  5. Re: If you tax the rich, they'll leave by Anonymous Coward · · Score: 2, Interesting

    The suite just replicates the comforts of home. If you have that much money, why not?

    On the other hand, it's the idiot fans who sit in the nosebleeds when they have a 50 inch plasma at home that puzzle me.