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

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."

Comments

So the taxpayer pays for overage, got it

[RichMan]

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.

Re:So the taxpayer pays for overage, got it

[Overzeetop]

Yeah, we wish...

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

Re:So the taxpayer pays for overage, got it

[swillden]

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.

Misleading- Good will is common accounting

[cbelt3]

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."

Re:If you tax the rich, they'll leave

[NotDrWho]

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."

Re:If you tax the rich, they'll leave

[Culture20]

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)?