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Government The Almighty Buck

Steve Ballmer Gets Billion-Dollar Tax Write-Off For Being Basketball Baron 255

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

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  • This is a wise policy. If you tax the rich too much, then they won't buy local basketball teams and instead will look elsewhere. Eventually there wouldn't be any professional sports at all in our great and beautiful nation. Instead of sitting down to watch the NBA on their televisions, Americans would instead see only short-statured, low-wage Chinese tossing a ball around instead. Kudos to the government for allowing an entrepreneur like Ballmer to keep his local business going.
    • by nucrash ( 549705 ) on Monday October 27, 2014 @08:15AM (#48239299)

      I thought he would most likely send the Basket Ball team, the Clippy's to India.

    • by gl4ss ( 559668 )

      I'm just thinking is there a loophole here for the old guys just selling the teams to each other every now and then and skipping paying taxes..

      or you pay tax when you sell the team? I guess not.

      • Re: (Score:2, Insightful)

        *sighs*

        A billion over FIFTEEN YEARS. Amounts to about $70 million a year.

        Considering that Ballmer is worth north of twenty Billion, we're not actually talking about a huge tax break here.

        What we are talking about is an article that combines fifteen years of tax deductions in order to put that magic "B" in the title to get people excited....

        • by king neckbeard ( 1801738 ) on Monday October 27, 2014 @09:28AM (#48239729)
          If it's not that much to Ballmer, I'll gladly take just a month of that. 5 million is plenty to me.
          • by cHALiTO ( 101461 )

            It's also plenty for the state, 70M can buy tons of infrastructure, and other tax-paid services. Just sayin..

        • by Culture20 ( 968837 ) on Monday October 27, 2014 @09:36AM (#48239803)
          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)?
          • Well, if his assets are $20 Billion and his return on all his assets were only 5%, he would be generating $1billion in income. A write off of $70 million lowers his taxable income to $930 million. ( my guess is his return is higher than 5% but that is a SWAG)

            • by Rob Y. ( 110975 ) on Monday October 27, 2014 @11:35AM (#48240993)

              And as passive income that billion a year is taxed at a 15% rate after all of his other deductions and loopholes. Whether or not you think a $70 mil writeoff is insignificant to a hundred billionaire, it's just this kind of insult to injury loophole (available only to the hyper rich) that makes a travesty of the notion that we're all in this together. But, of course, we're not - and apparently CrimsonAvenger is fine with that...

        • by luis_a_espinal ( 1810296 ) on Monday October 27, 2014 @10:08AM (#48240073) Homepage

          *sighs*

          A billion over FIFTEEN YEARS. Amounts to about $70 million a year.

          Considering that Ballmer is worth north of twenty Billion, we're not actually talking about a huge tax break here.

          What we are talking about is an article that combines fifteen years of tax deductions in order to put that magic "B" in the title to get people excited....

          We shouldn't need a 'B' to get excited. A billion is a billion whether it gets paid in a year or 15. And $70 million in taxes is $70 million no matter how you cut it. Under what type of cynic logic can this be justified?

          This is not $70 millions in non-taxable charities, but an investment on a money machine in the sports/entertainment industry.

        • by nucrash ( 549705 ) on Monday October 27, 2014 @10:42AM (#48240415)

          Think of it like this:

          If we took that money and spent it on education alone, considering the average cost of what it takes to put a student through school in a year ($11,153), that would allow for 6276 students. That's per year for 15 years.

          In less than two years, India would have been able to pay for another Satellite to orbit Mars.

          Think of the amount of road work that could have been done in that time?

          I know this is from a Tax and Spend Democrat, but right now, I know there are a lot of students that could use that money, as improving their living conditions would improve their school performance.

        • by RingDev ( 879105 ) on Monday October 27, 2014 @12:08PM (#48241337) Homepage Journal

          $20 billion in the bank.
          Figure 5% annual return (highly conservative) for $1 billion gross income
          15% unearned income tax rate.
          $150 million annual tax payment
          -$70 million annual tax credit

          So yeah, cutting his tax burden in 1/2 for buying a basketball team seems a little out of whack.

          For instance, imagine if you or I got to cut our income tax rate in half because we sponsored a little-league team. Wouldn't that be nice! But of course we can't. This law isn't set up to benefit the whole of society, it's set up to benefit those members of society who have enough money and power to effect the rules.

          -Rick

    • I enjoy this
      They have good team work and fundamentals but no jumpshot.

    • by NotDrWho ( 3543773 ) on Monday October 27, 2014 @08:44AM (#48239469)

      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."

      • by halivar ( 535827 )

        Basketball tickets are a luxury. If you buy them, it's because you chose to give Ballmer money. I can't help you with that.

        • by geoskd ( 321194 ) on Monday October 27, 2014 @12:29PM (#48241537)

          Basketball tickets are a luxury. If you buy them, it's because you chose to give Ballmer money. I can't help you with that.

          Thats right, we can choose not to buy basketball tickets (and I'm already in that camp), but we can't choose not to subsidize Balmers purchase of the team because a set of, long since gone, politicians wrote that nice little loophole into our tax code for us. The way I do the math, those assholes transferred about $10 from my pocket into Blamers pocket with just this one transaction. I had no say in the matter. I had no interest in the stupid basketball team (or the sport for that matter), and yet here I am subsidizing it...

          I want to know: What humanitarian need did my $10 fill? In what way is the world a better place than it would have been if Balmer had to cough up the price without my subsidy? I could fully support the idea if my money had gone towards curing cancer, or helping dying children, or something equally righteous, but how is supporting Basketball, a sport that is fully capable of paying its own way, helping better humanity? How is this anything other than yet another way in which those with the power and the money are stealing from the rest of us?

          • by halivar ( 535827 )

            It's not a subsidy; it's a tax credit that only applies to money he gives to the government that he would not have owed if he'd never purchased the team in the first place.

    • by Applehu Akbar ( 2968043 ) on Monday October 27, 2014 @10:12AM (#48240105)

      Ballmer also wouldn't be able to work on the problem the Clippers have been having lately: in the middle of a game, all the players suddenly stop right where they happen to be in action and freeze in place. Whenever this happens, you have to restart the game from the beginning. The team doctor says that a large load of viruses seems to be responsible.

  • by RichMan ( 8097 ) on Monday October 27, 2014 @08:15AM (#48239295)

    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.

    • by Imrik ( 148191 ) on Monday October 27, 2014 @08:22AM (#48239337) Homepage

      On the other hand, the person who receives payment has to pay taxes on the overvalue.

      • by Overzeetop ( 214511 ) on Monday October 27, 2014 @08:37AM (#48239417) Journal

        Yeah, we wish...

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

      • by gl4ss ( 559668 )

        you should be modded funny.
        in this case, no.

        though, if there is a calculable "REAL VALUE(TM)(R)" for a team, then it should be on sale all the time for that money - if it were, then I would approve of this system.

        but they're not, so the real value is actually the value you need to pay the current owner... the whole concept is so foreign to foreigner such as me that yeah this is just a tax break for the rich for nothing in exchange to the taxpayer.

        • There is something negative in exchange for the average tax payer, called: we prop up the difference because the bills still need to get paid. Teachers, public safety, roads, etc etc.

          This is yet another example of how that thick, bought-and-paid-for tax code benefits those who bought and paid for it. That means most of us that thought that government fairness wasn't an oxymoron get another kick in the slats.

          Remember to vote. And if in Chicagoland, often and frequently.

    • Re: (Score:3, Interesting)

      by ganjadude ( 952775 )
      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"???
      • by Nemyst ( 1383049 ) on Monday October 27, 2014 @08:58AM (#48239547) Homepage
        Sure, but only if I can get a tax credit for 50% the price of my next house. I mean, if the house was not sold, there wouldn't be any tax revenue.
        • depending on the value of your next house, you very well may be able to. you seem to think this kind of thing is only for the ultra rich, if you are not writing off your expenses you got no one to blame but you

          granted, im in favor of eliminating the IRS, and only having a tax on transactions, therefore none of this would even matter but by todays rules, if you buy a house for 200K and its only worth 100K, you can do the same thing ballmer is doing
      • There would be the revenue from Balmer's income taxes over the next 15 years.

      • 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"???

        Fine. If that's the case, would these "evil rich" do us all a favour and pay for the overwhelming publicly funded protection they get?

        • they do. look at the total tax revenue brought in by "the rich" compared to the tax revanue brought in by everyone else

          the top 1% of tax payers pay 38% of all income taxes yet only have a 20% share of total AGI. Furthermore, the top 50% of tax payers pay practically all of the nation’s federal taxes (97.3%) while commanding 87.25% of total AGI. This table from the IRS is the source for the often politically bantered argument that 47% of American income earners pay zero federal income taxes.

          - See more at: http://www.financialsamurai.co... [financialsamurai.com]

    • When anyone buys something with "goodwill"min the price they can take advantage of this, against future profits.

      This is no different than depreciation; it is actually disadvantageous to the taxpayer in the short term as you cannot write off the goodwill all at once against other income.

      Of all the things to get up in arms about, this really isn't one of them. Just wait until Ballmer starts pushing for H1b's for players...

      • Just wait until Ballmer starts pushing for H1b's for players...

        Players perhaps not, but there are janitors, technicians, AV guys, and a host of other positions that he very well could replace with low wage immigrant workers.

    • by swillden ( 191260 ) <shawn-ds@willden.org> on Monday October 27, 2014 @10:31AM (#48240279) Homepage Journal

      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.

  • 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."

    • by Freedom Bug ( 86180 ) on Monday October 27, 2014 @08:47AM (#48239487) Homepage

      Waiting 15 years is a better deal than everybody else gets. Everybody else gets to wait indefinitely; most have to realize a loss before it can be claimed. In other words, if you overpay for an asset you don't get to claim a loss until you sell that asset to somebody else.

      • Waiting 15 years is a better deal than everybody else gets. Everybody else gets to wait indefinitely; most have to realize a loss before it can be claimed. In other words, if you overpay for an asset you don't get to claim a loss until you sell that asset to somebody else.

        No. He already paid for the team. So he has already realized the loss. The question is whether its a short term loss, or not. Either way, if you or I were to purchase a home and then sell it for a loss, we could choose to do the exact same thing: amortize the lost money over the course of many years. As a homeowner you're given the option of realizing the loss in a single tax year, an option he did not have with this loss. The only difference between this and a homeowner who loses money is the scale.

      • For personal assets, yes. You as an individual cannot take tax advantage of buying something overpriced. Buyer's remorse is not tax deductible.

        For a company, making that bad decision has other implications; your business has an inflated book value which will never hit equilibrium. Example: Computers are depreciated over 7 years. In years 1, you write off 1/7 the cost of the computer, and treat the other 6/7 as profit. Year 2, you can write off 1/7 against profits that year... same thing in year 3, provi

      • by Shatrat ( 855151 )

        He's not claiming a loss. He's listing Goodwill on his balance sheet. Since this is an 'intangible' asset it's taxed differently than a huge stadium.

    • by eric31415927 ( 861917 ) on Monday October 27, 2014 @08:56AM (#48239533)

      There is no loophole here.
      Imagine buying a truck to use in a business. The cost of the truck can be written off against earnings over a number of years instead of all at once. The accounting principle here is to spread the cost of the asset over its useful life.

      Goodwill is also an asset that can be written off over a number of years. It's an intangible asset with a more ambiguous useful life. The mechanism for writing it off over 15 years instead of, say, 40 years may be questionable. Government policy to attract investment may have led to the 15-year period.

      So long as Ballmer is forced to follow the government's rules and he spreads the cost over many years, I see no problem..

    • by DRJlaw ( 946416 ) on Monday October 27, 2014 @09:21AM (#48239689)

      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).

      If it were basic accounting 301, then you would have learned that "goodwill" does not equate to the purchase price minus the "fair market value" of the asset. Goodwill represents the "fair market value" of the asset minus the value of the tangible assets -- the inventory, machinery, real estate, etc. that can be quantitatively and qualitatively priced by sales or marking to a known market.

      If you were to purchase the Coca-Cola corportion, then you would be spending an enormous amount on "goodwill." That is because the value of the trade secret for the formulation of Coca-Cola, the value of the brand recognition for Coca-Cola, and the value of the bottler network relationships are all intangible assets that do not have a concrete or easily ascertainable value. A significant part of the value of Coca-Cola lies not in the value of the HQ building (real estate), the office computers, lab, and pilot plant equipment (you don't think the actual corporation owns very many bottling lines and delivery trucks, do you?), but in the value of being Coca-Cola and not Royal Crown Cola.

      That's goodwill. You didn't necessarily make a bad decision buying Coca Cola because you didn't buy it for the price of RC Cola, you paid for intangibles that contributed to the medium term P/E ratio (or similar metric) that you actually used to detemine the price tha you were willing to pay. If you try to pack that value into the tangible assets of the corporation, which depreciate over time and must be replaced (note, also over much shorter depreciation scales), then you end up with silly values that are way above market. If you offer a price only based on "real" values of the physical assets, the seller is going to tell you to take a long walk off a short pier.

      The difference between (1) the price of the tangible assets and (2) the price the buyer is willing to pay and the seller is willing to accept, i.e., the very definition of a "fair market value," is the value of the intangible assets. Some of those you can estimate a value for, if need be, but frequently they are all lumped together as "goodwill." Sure you can overpay and make a bad decision, but that's because you eff'ed up the value of the revenue stream you could generate versus the cost of the debt you took on(or the opportunity cost of the money you took out of whatever other investment you shifted out of to) to buy it, not simply because you spent money on goodwill.

      Signed,
      A guy who does M&A work

    • by nealric ( 3647765 ) on Monday October 27, 2014 @09:25AM (#48239703)

      Thank you. I am a tax attorney. People who rant about "tax loopholes" rarely understand what they are talking about. When people talk about loopholes, they can describe any of the following:

      1) A logical flaw in the wording of the code allowing very low tax for a transaction or allowing a transaction to "shelter" other income. This would be something like the way Subchapter K was worded (portion of the tax code governing partnerships) allowing the Son of BOSS tax shelter. I would consider these this a "true" loophole. However, when this happens, the IRS will (usually successfully) challenge the transaction under various anti abuse rules in the tax law.

      2) Tax preferences. These are things that can be as common as the home mortgage interest deduction or as esoteric as the special dispensation for non-profits that host bingo games. The government is trying to encourage home ownership or VFW halls and writes something into the tax code. Tax preferences can also be the result of lazy budgeting by Congress, describing what is really a spending measure as a tax cut.

      3) Provisions of the tax code that apply to certain complex business transactions. Things like the tax deferral for controlled foreign corporations, or as we have here, the amortization of goodwill. Business transactions can be really complex, which means the tax code tends to have to follow suit with complexity. Sometimes these provisions can produce really good results for the business. Often, they can produce very bad results if you aren't careful as a tax planner. When they produce favorable results (or what seems like favorable results) we call them "loopholes". But really, it's just an attempt to accurately measure and tax "income", which can be a very difficult thing to do.

      4) Tax evasion. People talk about things like undeclared offshore accounts as a "loophole". It's not really a loophole. It's just tax evasion that is rather hard to catch.

      • Re: (Score:3, Insightful)

        by Anonymous Coward

        They don't have to understand to the same level as you, they know that the extremely wealthy can protect their wealth via vehicles the rest of the world cannot. That's the fucking difference.

    • Re: (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 would
  • by 140Mandak262Jamuna ( 970587 ) on Monday October 27, 2014 @08:41AM (#48239441) Journal
    Americans, do not give into class warfare arguments. You too have the right to buy sports franchises and write off billion dollars from your taxable income. You too have the right to create a SuperPAC and spend a million dollars to launch attack ads against the politicians who you don't like. Every one is equal before the law. And America has the best political system money can buy, let no one try to convince you otherwise.
    • by Livius ( 318358 )

      "In its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets, and steal loaves of bread."

  • According to your own words. Funny though how when I pointed out that most MS products don't earn a profit I was downvoted as flamebait.

  • Hate the game.

    I'll wager that Ballmer doesn't actually know much about his taxes. He pays someone (or, more likely, a group of someones) to figure out his tax return. Their job is to make sure he pays what he owes and not a penny more. I make considerably less than Ballmer but I also employ an accountant to do my tax return versus doing it myself. I expect her to advise me on how to pay the correct amount. I'm not looking to get audited or get sent to jail for tax fraud, but on the same token I have many ot

  • by Required Snark ( 1702878 ) on Monday October 27, 2014 @09:11AM (#48239627)
    NBA, NFL, MLB, it makes no difference. They are all state supported monopolies that make obscene profits by stealing from the general public.

    They have lots of ways to steal, and they are really good at it. First, of course is their monopoly status. It's what every giant corporations dreams of. All the benefits of pretend capitalism, none of that pesky competition.

    Then there's the stadium scam. Get a city to build you a stadium, along with getting a bunch of tax breaks. Pretend that you are bringing in "jobs". In fact most of the jobs are low level minimum wage jobs for running the physical plant and selling food. Not much in the way of real economic benefit.

    The media contracts are where they real big time theft happens. If you have cable or any high speed media link, you are automatically paying for sports. Then if you want to watch something not in your area, you have to pay extra for the privilege. It's like the MicroSoft Tax, only worse. The only way to opt out is to stick to terrestrial HD broadcast.

    No wonder Ballmer joined the owners club. He finally achieved 100% monopolist status, which he was never quite able to get at Microsoft.

    Personally, I hope he chokes to death on some greasy stadium food.

  • I.
    LOVE.
    THIS.
    COUNTRY!
    WOOOOOOO!

  • So that he will be able to use this credit, even in the next 15 years?
  • , , , I'm more interested if he'll hire Bobby "The Chair Chucker" Knight to be head coach . . . They certainly share the same style . . .
  • by QuietLagoon ( 813062 ) on Monday October 27, 2014 @09:56AM (#48239965)
    Government-sanctioned monopolies that suck billions of dollars out of tax-paying citizens.
  • by wonkey_monkey ( 2592601 ) on Monday October 27, 2014 @10:25AM (#48240227) Homepage

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

    C'mon, we can do better than that:

    Ballmer Bags Billion Bucks By Becaming Basketball Baron

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