Embattled Clippers owner Donald Sterling, pictured center in the photo above, is slowly but surely being forced out of the exclusive circle that comprises ownership over the NBA. While Sterling has a track record of reprehensible statements and behavior (some of it on the record, some of it possibly reputable yet unconfirmed, and some of it tabloid gossip), the NBA was forced into action after Sterling’s girlfriend leaked some damaging audio of Sterling asking her not to bring black people to Clippers games to TMZ. The big takeaway there: not everyone follows court proceedings regarding shady NBA owners, but everyone listens to the celebrity shame media outlets.
Rightly so, in this case. NBA commissioner Adam Silver and the rest of the league quickly moved to issue a lifetime ban on Sterling from games, practices, and league facilities, as well as putting the cogs in motion for a sale of the team. Sterling, who bought the Clippers in 1982 for $12 million dollars, may not have to pay any taxes on his sale of the team. For a franchise valued at over one billion dollars, this is a big deal.
“If Sterling had voluntarily sold the team for $1 billion, he would have owed about $200 million in federal income tax and another $123 million in California state income tax,” writes The Daily Beast (italics theirs.) “But thanks to a tax law that applies only to forced sales or other “involuntary conversions,” Sterling’s profits may all be tax-free.”
Of course, there’s more to it than just that — the forced sale isn’t the only requirement for a tax-free profit. As the The Daily Beast points out, Sterling would have to satisfy the requirement that the money be spent on “a similar or related service,” but since the IRS fails to define ‘similar’ or ‘related,’ it becomes more of an opportunity for some legal hurdling than fun that could be had watching Sterling attempt to buy another sports team. The IRS ruling, wonderfully titled “Involuntary Conversions,” can be found here, if you’re the kind of person that enjoys reading about tax law (it takes all kinds, right?)
Most obnoxiously, it appears that the fallout from Sterling’s racist tirade could net him millions of dollars and the chance to double down on any future investments made by the soon-to-be former NBA owner. Once Sterling dies, his net profits and expanded investment portfolio, which would be safe from income tax, could be passed on to his family. Sounds reasonable. Or, rather, not reasonable at all.