Why doesn't the author just call it depreciation, which is what it is? It's as if they're trying to make a story about some new mystery loophole....
"Congress inaugurated the modern era of amortization by simplifying the rules in 1993: Under the new regime, the purchaser of a business would be allowed, over the span of 15 years, to write off more types of intangible assets. This might have been welcome news for the sports business. But Congress explicitly excluded the industry from the law.
Following lobbying by Major League Baseball, in 2004, sports teams were granted the right to use this deduction as part of a tax bill signed by President George W. Bush, himself a former part owner of the Texas Rangers. Now, team owners could write off the price they paid not just for player contracts, but also a range of other items such as TV and radio contracts and even goodwill, an amorphous accounting concept that represents the value of a business’ reputation. Altogether, those assets typically amount to 90% or more of the price paid for a team."
But I guess if you squeeze your eyes hard enough, everything looks the same.
The word has a nearly constant emotional appeal now. I can think of another topic that it is used a ton and means less than nothing. It should be considered bad writing by now.
> But Veeck dreamed up an innovation, a way to get a second tax deduction for the same players: depreciation. The way he accomplished this was by separately buying the contracts before the old company was liquidated, instead of transferring them to the new company as had been done before. That meant that the contracts were treated as a separate asset.
They also discuss how the problem is not the concept of depreciation but the relatively recent changes allowing it to be used for things which don’t depreciate or where the valuations are highly subjective.
True for most tax "loopholes."
All that said, I'd love to see the rolled up sleeves version actually going over the account... or a fictitious one. Let's be real though. It's more likely to get eyeball on HN than elsewhere, but 96.2% would not read it and we would still be discussing it based on a surface level, bias-ridden understanding.
> the purchase price was composed of assets... that degrade over time ... in few industries is that tax treatment more detached from economic reality than in professional sports ... Ballmer still gets to deduct the value of those assets over time
I'm reading this and thinking, wait are they just talking about depreciation? That's not something special about sports teams, it's also very common in real estate.
Calling it a "financial magic trick" only makes the obfuscation worse.
We tax income, because that's the actual money you make. So if I buy a business for $500 and only make $100 a year, I'm not really making money until after 5 years. If I have to depreciate that asset over 10 years then I can deduct $50 a year and have to pay taxes on $50.
Depreciation is a handout to the tax man honestly. The reality is that until you have made more money than the purchase price you are not really making money.
You need to be more precise with "depreciate."
These assets (tangible/intangible) have a limited useful life and generate revenues beyond the current period. For sports franchises, there's no guarantee that they'll be around forever, and they also require continuous working capital maintenance and capex to continue operating.
There are limits to what can be depreciated.
Generally, IP needs to be purchased (not self-built) in order to be depreciable.[0]
[0] https://www.investopedia.com/ask/answers/061715/intellectual...
Do a sport team have it value degrade, and if so, by how much each year?
Depreciation is just an accounting trick, e.g. if you buy a laptop, you can’t put it in costs immediately (in the profit = sales - costs equation), it depreciates over say 4 years (i.e. only 25% of the purchase price can be accounted as cost each year).
Does this really happen with property? There’s no fundamental reason why a 100 year house wouldn’t be worth just as much as a new one, with proper maintenance (which can, and IMO should, be accounted separately).
Also, houses built today have better design and better safety. I wouldn't want to live in a 100 year old house in LA.
Genuine, partly-rhetorical: Which of the PRISM stories that came out after the Snowden revelations asserted and proved illegality? IIRC, no one from the government nor any of the C-suite tech executives who secretly approved the surveillance were charged or convicted with anything.
Looking at the lengthy Wikipedia article [0], I see that foreign governments said "nightmarish if true". James Clapper and President Obama himself acknowledged the existence of the program and defended it as passionately and robustly as any of the rich people defending their tax situations.
Should Snowden/Greenwald/Guardian/WaPo held off on publishing the PRISM revelations until they had proof of criminality in hand?
[0] https://en.wikipedia.org/wiki/PRISM_(surveillance_program)#M...
It even highlights how they're using recent changes in the tax code to claim depreciation on assets that either don't actually depreciate or the value is highly subjective.
It's a lot more than just "Oh boo boo is us our asset lost value last year so now we don't have to pay taxes".
Also, capital gains are assessed relative to the depreciated price of the asset, so if there is a wild divergence between that and market value, the owner will pay a huge tax bill on sale.
This is the problem with the post-Wikileaks concept of "leaked documents". By default, the reader is lead to believe that by a document being leaked it demonstrates something nefarious or shadowy.
We saw this most notably with the Panama Papers and the Podesta emails. No one was directly prosecuted as a result of evidence derived from the wholesale publishing of the material. In the case of Podesta, it revealed absolutely nothing. So much so that a certain group of people became obsessed with innocuous messages about pizza.
The ProPublica IRS hack, in my opinion, is doing nothing for journalism ethics.
Billions of tax dollars have been recovered due to the Panama Papers alone [1]. The Podesta emails were BS, but everyone in the know always have agreed on that.
How you can claim that the ProPublica IRS leak isn't good journalism is unclear to me. In the few articles they've published, they've clearly exposed the nefarious practice of legal tax avoidance using specific leaked information that wasn't documented or widely known before.
[1] https://www.icij.org/investigations/panama-papers/panama-pap...
Totally innocuous. I mean, who doesn't write vague messages about pizza and pasta? Who doesn't collect art depicting stylized child abuse? Who isn't friends with convicted child molesters? It's all merely a coincidence.
Of course it's impossible to get direct prosecution from any leaks of vague messages. That doesn't mean they aren't nefarious or shadowy. Here's another totally innocuous message from a high-level "waste-management consultant" in New Jersey: "Hey Paulie, our friend with the hair needs to go".
The depreciation of assets is a rich-unfriendly feature of the tax code. It explicitly prevents the rich (those buying big assets) from writing of the expense in a single tax year and therefore reducing their profit and so their tax.
Unlike, say salary expenses, it forces them to defer most of the expense to future years, earning the tax collector more money earlier.
So if you don't depreciation, are you arguing for no expensing of capital assets, ever? (Which makes no sense).
Perhaps could you be precise how some mythical non-elite person would write this aspect of the tax code?
Either they don’t do that OR they do it and just dismiss the expert’s opinion (e.g. “oh depreciation, yeah that’s standard, every businesses uses that to properly account for the cost of capital investment”)