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)

Biden praises Braves’ ‘unstoppable, joyful run’ to 2021 win

Geoff Burke-USA TODAY Sports
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WASHINGTON — President Joe Biden said the Atlanta Braves will be “forever known as the upset kings of October” for their improbable 2021 World Series win, as he welcomed the team to the White House for a victory celebration.

Biden called the Braves’ drive an “unstoppable, joyful run.” The team got its White House visit in with just over a week left before the 2022 regular season wraps up and the playoffs begin again. The Braves trail the New York Mets by 1.5 games in the National League East but have clinched a wildcard spot for the MLB playoffs that begin Oct. 7. Chief Executive Officer Terry McGuirk said he hoped they’d be back to the White House again soon.

In August 2021, the Braves were a mess, playing barely at .500. But then they started winning. And they kept it up, taking the World Series in six games over the Houston Astros.

Biden called their performance of “history’s greatest turnarounds.”

“This team has literally been part of American history for over 150 years,” said Biden. “But none of it came easy … people counting you out. Heck, I know something about being counted out.”

Players lined up on risers behind Biden, grinning and waving to the crowd, but the player most discussed was one who hasn’t been on the team in nearly 50 years and who died last year: Hall of Famer Hank Aaron.

Hammerin’ Hank was the home run king for 33 years, dethroning Babe Ruth with a shot to left field on April 8, 1974. He was one of the most famous players for Atlanta and in baseball history, a clear-eyed chronicler of the hardships thrown his way – from the poverty and segregation of his Alabama youth to the racist threats he faced during his pursuit of one of America’s most hallowed records. He died in January at 86.

“This is team is defined by the courage of Hank Aaron,” Biden said.

McGuirk said Aaron, who held front office positions with the team and was one of Major League Baseball’s few Black executives, was watching over them.

“He’d have been there every step of the way with us if he was here,” McGuirk added.

The president often honors major league and some college sports champions with a White House ceremony, typically a nonpartisan affair in which the commander in chief pays tribute to the champs’ prowess, poses for photos and comes away with a team jersey.

Those visits were highly charged in the previous administration. Many athletes took issue with President Donald Trump’s policies and rhetoric on policing, immigration and more. Trump, for his part, didn’t take kindly to criticism from athletes or their on-field expressions of political opinions.

Under Biden, the tradition appears to be back. He’s hosted the NBA champion Milwaukee Bucks and Super Bowl champion Tampa Bay Buccaneers at the White House. He joked about first lady Jill Biden’s Philadelphia allegiances.

“Like every Philly fan, she’s convinced she knows more about everything in sports than anybody else,” he said. He added that he couldn’t be too nice to the Atlanta team because it had just beaten the Phillies the previous night in extra innings.

Biden supported Major League Baseball’s decision to pull this summer’s All-Star Game from Atlanta to protest Georgia’s sweeping new voting law that critics contend is too restrictive.