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.

Blue Jays clinch playoff berth with Orioles’ loss to Red Sox

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TORONTO — The Blue Jays clinched a postseason berth Thursday without taking the field.

Toronto was assured of an AL wild card berth when the Boston Red Sox beat the Baltimore Orioles 5-3.

If Toronto holds its current position as the first of the AL’s three wild cards, the Blue Jays would open a best-of-three wild-card series at Rogers Centre next week.

“These guys are excited to be in this position,” Blue Jays manager John Schneider said after Wednesday’s 8-3 loss to the New York Yankees. “You’ve got three really good pitchers lined up against a good Boston team, playing at home. So I think it’s more excitement more than it’s nerves or anything. I think the guys are going to come out and be ready to roll on Friday night.”

Toronto became the fourth AL team to clinch a playoff berth, joining division champions Houston, the Yankees and Cleveland. The Astros and Yankees have first-round byes.

The Blue Jays last went to the playoffs in 2020, when they were knocked out with two straight losses to Tampa Bay.

Eight of the 12 berths in the expanded postseason have been clinched: The Los Angeles Dodgers and St. Louis earned division titles, and Atlanta and the New York Mets are assured no worse the wild cards while still competing to win the NL East. The Dodgers have a first-round bye.