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The Purchase and Sale of a Sports Team: Tax Issues and Rules

Tax Article
June 1, 2010

Originally published in the Michigan Bar Journal (June 2001)

This article focuses on the tax issues of greatest concern in the purchase and sale of a sports team. These include the following:

  • Player Contracts (a nine-figure item)
  • Leases (also including signage, concessions, and parking)
  • Local Television/Cable/Radio
  • Covenants Not To Compete
  • National Television Revenues
  • Season Ticket Holders
  • Sponsorship Agreements
  • Merchandising Rights
  • Sky Box Leases

The tax issues for the above components include, among other things, valuation, eligibility for amortization, and tax accounting. The key fact of major league business life is that the club is a sophisticated 24/7/365 marketing machine. Different products are offered to various economic strata. For example, corporate America and high income individuals buy sponsorship packages, season tickets, and sky boxes; the blue collar fans purchase any available single game seats; civil groups buy blocks of ‘‘nose bleed’’ seats (if available); and teenagers buy team apparel.

Given the rising values of American professional franchises, as well as league expansions and more sale transactions, the Internal Revenue Service has taken interest in this growing industry. The service has established a sports franchise office in Plantation, Florida. Unlike years past where a local revenue agent was ‘‘star struck’’ because the taxpayer was the local team, and the agent had no experience in this complicated tax arena, the examination is now quarter-backed by exceedingly competent IRS personnel in Florida who are also knowledgeable about the business and tax issues. In short, the government has greatly enhanced its audit game. In November, a ‘‘Sports Franchises’’ Market Segment Specialization Program (the Sports MSSP) was issued by the Internal Revenue Service.

Read the article in its entirety: The Purchase and Sale of a Sports Team: Tax Issues and Rules

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