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NFL owners have made millions off obscure tax break

2 points by SirLJ 9y ago

kazinator 9y ago
You don't make money off tax breaks; you just lose less money. Taxes don't generate value. Firstly, to be able to write off the purchase of a team, or whatever else, you have to make the purchase. The article is talking about the increased value of teams. You haven't made millions just because some asset is more valuable on paper; first that asset has to be liquidated. If a team is sold, is that not taxable income? The buyer may be able to write it off, but surely, the seller can't avoid tax on the proceeds. > Well, take the case of fracking billionaire Terry Pegula, who in 2014 paid $1.4 billion for the Buffalo Bills. Pegula is able to deduct $93 million a year — one-fifteenth of the purchase price — against the team’s profits and his income for 15 years. The Bills, according to Forbes, made $53 million last season. If Pegula earned $40 million in 2016, the Bills’ tax deduction could reduce his tax bill to zero. Let's see, if the Bills consistently made $53M for fifteen years straight, and if Pegula earns $40 million consistently for fifteen years, then with this tax break, Pegula will only be breaking even against that 1.4B purchase at the end of those 15 years (in terms of cash flow, ignoring the asset). Gee, burn the evil, money-grabbing SOB! At the end of that period, Pegula holds the team as an asset. He can sell that; and is that not taxable income then?
- youarewrong 9y ago
  The article is talking about writing off the purchase price of a team over 15 years. That's a very generous tax break as it allows to claim a loss based on the fiction that a NFL team is used up after 15 years and needs to be replaced with a new one.
  - kazinator 9y ago
    Isn't it used up? Guys who were 25 are now forty. The team has operating expenses. It's not a pure asset like a vault full of gold bricks. It is normal to be able to write off asset acquisitions, not only expenses. E.g. I'm a self-employed software contractor. My gov't lets me write off, say, a new laptop, which goes into my ledger as an asset.
    - youarewrong 9y ago
      It would be used up if we'd expect the package of trademarks, rights, properties, NFL membership, etc that is the "team" to have lost most of its value after 15 years. Nobody expects that. Everybody expects your 15 year old laptop to be worthless. (Operating expenses don't matter, they're accounted for anyways. No double dipping!)
      - kazinator 9y ago
        > Everybody expects your 15 year old laptop to be worthless. Though that is true, the rules don't actually allow it to be written off over 15 years anyway; and, besides, they are not based on the future value of specific kinds of equipment. If some asset which completely retains its value were necessary for my business, I could still write off its purchase.

2 points by SirLJ 9y ago

You don't make money off tax breaks; you just lose less money. Taxes don't generate value. Firstly, to be able to write off the purchase of a team, or whatever else, you have to make the purchase. The article is talking about the increased value of teams. You haven't made millions just because some asset is more valuable on paper; first that asset has to be liquidated. If a team is sold, is that not taxable income? The buyer may be able to write it off, but surely, the seller can't avoid tax on the proceeds. > Well, take the case of fracking billionaire Terry Pegula, who in 2014 paid $1.4 billion for the Buffalo Bills. Pegula is able to deduct $93 million a year — one-fifteenth of the purchase price — against the team’s profits and his income for 15 years. The Bills, according to Forbes, made $53 million last season. If Pegula earned $40 million in 2016, the Bills’ tax deduction could reduce his tax bill to zero. Let's see, if the Bills consistently made $53M for fifteen years straight, and if Pegula earns $40 million consistently for fifteen years, then with this tax break, Pegula will only be breaking even against that 1.4B purchase at the end of those 15 years (in terms of cash flow, ignoring the asset). Gee, burn the evil, money-grabbing SOB! At the end of that period, Pegula holds the team as an asset. He can sell that; and is that not taxable income then?

youarewrong 9y ago
The article is talking about writing off the purchase price of a team over 15 years. That's a very generous tax break as it allows to claim a loss based on the fiction that a NFL team is used up after 15 years and needs to be replaced with a new one.
- kazinator 9y ago
  Isn't it used up? Guys who were 25 are now forty. The team has operating expenses. It's not a pure asset like a vault full of gold bricks. It is normal to be able to write off asset acquisitions, not only expenses. E.g. I'm a self-employed software contractor. My gov't lets me write off, say, a new laptop, which goes into my ledger as an asset.
  - youarewrong 9y ago
    It would be used up if we'd expect the package of trademarks, rights, properties, NFL membership, etc that is the "team" to have lost most of its value after 15 years. Nobody expects that. Everybody expects your 15 year old laptop to be worthless. (Operating expenses don't matter, they're accounted for anyways. No double dipping!)
    - kazinator 9y ago
      > Everybody expects your 15 year old laptop to be worthless. Though that is true, the rules don't actually allow it to be written off over 15 years anyway; and, besides, they are not based on the future value of specific kinds of equipment. If some asset which completely retains its value were necessary for my business, I could still write off its purchase.