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New tax law could affect MLB trades

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Jim Tankersley of the New York Times notes that a tax law passed by Republicans could affect trades in Major League Baseball. The law added the word “real” to a certain line of tax code that now only allows real estate trades to qualify for tax immunity. Previously, certain assets like trucks and machinery could have been traded tax-free.

A perhaps unintended consequence of that change could mean baseball teams could have to pay capital gains taxes when they trade away and acquire players. MLB’s chief legal officer Dan Halem said, “There is no fair market value of a baseball player. There isn’t. I don’t really know what our clubs are going to do to address the issue. We haven’t fully figured it out yet. This is a change we hope was inadvertent, and we’re going to lobby hard to get it corrected.”

Tankersley wonders how players would be valued for the purposes of this tax law:

Mr. Verlander, for example, was clearly a more immediately valuable asset to the Astros than the three prospects they traded to get him. He gave up only four runs in his five regular-season starts for the team, then won four straight starts to begin the playoffs. In very simple terms, he brought value to the Astros in a trade, and had the new law been in place last year, the team would have owed taxes on that added value.

But what, exactly, was that value? Was it the size of his contract? Mr. Verlander earned $28 million last year, while the players traded for him drew minor-league salaries. Was it the additional wins he brought to the team? Statisticians estimate Mr. Verlander gave the Astros nearly two more wins last season, a value that, depending on the statistician, could reach $20 million. Or was it some calculation of the total future value Mr. Verlander will bring to the team, minus the total future value it gave up in the prospects it traded away — and possibly adjusted for the amount the team will have to pay Mr. Verlander?

Complicating matters further is that teams value players differently, and one player might help a certain team far more than another team. A struggling club with a surplus of starting pitchers might trade one to a playoff contender in desperate need of one, in exchange for position players who could improve a struggling lineup. In that case, both teams could, reasonably, be considered to have gained value in the trade, and thus would owe taxes on it.

Republicans said they weren’t trying to hamstring sports teams, but that’s exactly what they might have done here. It seems likely that the law will eventually be amended to exempt sports teams, given that leagues like the MLB and NBA are enormous and worth so much money. Whether that will be done in a reasonable amount of time is another question entirely.

Bradley Zimmer to miss 8-12 months after shoulder surgery

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Indians outfielder Bradley Zimmer is out for the year after undergoing arthroscopic surgery on his right shoulder, the team announced Saturday. The projected recovery timetable spans anywhere from 8-12 months, which puts Zimmer’s return in the second half of the 2019 season, assuming that all goes well.

Zimmer, 25, had not made an appearance for the Indians since June 3. He racked up a cumulative nine weeks on the major- and minor-league disabled lists this season and will have finished his year with a .226/.281/.330 batting line, seven extra-base hits, and four stolen bases in 114 plate appearances.

The outfielder reportedly sustained his season-ending injury during a workout in Triple-A Columbus, where Cleveland.com’s Joe Noga says Zimmer began feeling discomfort in his shoulder after completing a set of one-handed throwing drills. Comments from club manager Terry Francona suggest that the Indians have every reason to believe that he’ll make a full recovery by next summer, though it’s not yet clear whether or not he’ll need additional time to readjust to a full workload when he takes the field again.