In what will go down as one of the greatest unintended consequences in sports and tax law history, a recently published tax law theory is promoting the idea that the forced sale of the LA Clippers by NBA owners may have just given Donald Sterling a $2 billion TAX FREE benefit thanks to an obscure section of the tax co
On this weeks Speaking of Justice, Mark Wahlstrom took the microphone and hosted one of the nations leading tax law experts, Attorney Rob Wood. Wood, who wrote a provocative article in Forbes magazine on this very issue earlier this week. In that article Wood looks at the IRC section code 1033, which is similar too, but differs in key ways from the more common and widely understood section 1031, which governs roll over of property to avoid taxes.
As you will hear in the in depth interview, section 1033 is specifically in the code to handle the "forced sale of assets" and allows the party who was forced to sell a great deal of discretion on how to reinvest those assets from the sale. It essentially allows up to two years to make investments of a "similar nature", which does not necessarily mean another sports franchise. This bonanza could save Donald Sterling and his wife over $660 million in capital gains taxes on the state and federal level.
We will continue to follow this story, but as Wahlstrom outlines in the discussion, this forced sale and the possible tax savings could explain the sudden decision by Sterling to drop his suit against the NBA and to simply take the $2 billion and run. Not a bad consolation prize for losing the right to sit court-side at NBA games.
Attorney Rob Wood is a noted tax law expert with the San Francisco, CA based Wood, LLP firm and is a regular columnist for Forbes Magazine and The Tax Law Channel on the Legal Broadcast Network. Mark Wahlstrom is the CEO of the The Legal Broadcast Network and also the President of Wahlstrom and Associates, one of the leading firms working on structured sales, structured legal fees, mass tort administration and taxable damage cash flow planning.