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The IRS gives baseball teams a break

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April 15 is quickly approaching so here’s one for all the tax nerds out there: the IRS issued new guidance today that will give professional sports teams some relief from a new twist presented by the tax law enacted in 2017.

The relevant provision related to how businesses are taxed on swapped assets, which included swaps of player contracts by professional sports teams. Under the old law, a swap of stuff of unequal value did not create a taxable event. So, if I traded a $50 piece of equipment for a $100 piece of equipment, I realized a $50 gain, but I was not taxed. Same went for me trading a contract worth $5 million for one worth $10 million. A trade of players did not create a taxable event for the Mudville Nine.

The 2017 law changed that, however. In the new law, only real estate swaps were not taxed. All other swaps of business assets are now taxed. Which is fine if you’re dealing with a printer or a metal stamper or something. It’s a little harder on a baseball player contract because how does one really value a $10 million contract? What if it’s for a player who sucks? What if it’s a sharply team-friendly contract for a much more valuable bit of control on a star player? Kind of a mess.

Now that’s all out of the way. From the IRS:

The Internal Revenue Service issued guidance today that provides a safe harbor allowing professional sports teams to treat certain player and staff-member contracts and draft picks as having a zero value for determining gain or loss to be recognized on the trade of a player or staff-member contract or a draft pick.

Historically it has been difficult for professional sports teams to assign a monetary value to contracts or draft picks due to the fluctuating nature of the performance of players and staff members, and market conditions.  This guidance allows professional sports teams to avoid having to value their player contracts, staff-member contracts, and draft picks to determine the amount of any gain or loss to be recognized.  A team using the safe harbor recognizes gain only if cash is received in the trade.

The IRS announced the guidance in Revenue Procedure 2019-18, posted today on IRS.gov.

There are now 30 people in baseball front offices who, presumably, have one less task to do each spring.

(Thanks to Chris Jones for the heads up)

Donaldson ejected for kicking dirt on plate after home run

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Minnesota’s Josh Donaldson managed to get ejected while hitting a home run.

Donaldson barked at plate umpire Dan Bellino for the second time in the sixth inning of a 4-3 loss to the Chicago White Sox on Thursday.

With the score 2-2, Bellino called a strike when the 2015 AL MVP checked his swing on a 2-0 pitch from Reynaldo Lopez.

Manager Rocco Baldelli came out to speak with Bellino, and Donaldson homered down the left-field line on the next offering. After rounding the bases, Donaldson kicked dirt at home plate as he crossed it.

Bellino ejected him immediately, and Donaldson, realizing he had missed home plate, returned to the plate to touch it and then argued as he kicked more dirt on it.

Donaldson also had argued with Bellino on a 1-1 breaking ball in the first inning that appeared to be high but was called a strike, leading to a strikeout.

“We need Josh on the field, out there playing, and at third base,” Baldelli said. “That’s when we’re at our best. And so that’s really the end of it. I think we can move past it at his point, and go from here.”