A scene matters when behavior turns and value changes under pressure.

LA LAKERS DEAL: IT’S NOT A LOOPHOLE Bill Veeck bought the Cleveland Indians in 1946 and popularized the structure now being called a billionaire tax dodge. His argument was simple. A sports franchise is not merely a name and a league membership. It is a portfolio of player contracts. Those contracts are wasting assets: players age, contracts expire, and rosters turn over. Wasting assets can be written off over their useful lives. Players age. (LeBron James remains under active investigation by our best scientists.) Veeck amortized the value of his roster. The IRS fought variations of it for decades. But courts repeatedly accepted the underlying principle: player contracts have finite economic lives and therefore meet the standard for amortization. Congress did not miss a beat. Congress addressed this several three times. In 1976, Congress created a presumption that no more than 50% of a franchise’s purchase price should be allocated to player contracts unless the buyer could justify more. That was a guardrail, not a prohibition. In 1993, Congress enacted Section 197—the modern 15-year amortization rule for purchased goodwill and other business intangibles—but specifically excluded professional sports franchises. Then, in 2004, Congress reversed course. The American Jobs Creation Act repealed the exclusion and brought sports franchises under Section 197 alongside other businesses that acquire goodwill, trademarks, customer relationships, and similar intangible assets. The 2004 law made the write-off slower, not faster. The reason takes a minute to explain, but it is the whole story. When you buy a business, you do not buy 'a business' for tax purposes. You buy a basket of assets. The purchase price must be divided among those assets, and each category may have a different cost-recovery schedule. Before 2004, a dollar allocated to player contracts could generate deductions over roughly five years. A dollar allocated to franchise value or goodwill generally produced no annual amortization deduction. Its basis might be recovered at sale, but not along the way. Same dollar out the door. Wildly different tax outcome. Everything depended on which line of the appraisal captured it. Buyers therefore had an enormous incentive to allocate as much of the purchase price as possible to the roster. Franchise sales became appraisal battles over how much value belonged (i) to the players vs. (ii) the franchise name itself. When Bud Selig’s group bought the Seattle Pilots and moved them to Milwaukee, it allocated $10.2 million of the $10.8 million purchase price to player contracts—roughly 94%. The franchise itself was assigned just $500,000. In effect, the buyers argued that the team was worth about six cents on the dollar without its players. The court upheld the allocation. Congress's 2004 law largely ended that fight. Player contracts, franchise rights, trademarks, and goodwill acquired with a team generally became amortizable over the same 15-year period. Buyers gave up the possibility of writing off aggressive roster allocations over five years. In exchange, they gained the ability to amortize the broader pool of acquired intangible value over fifteen. The rule became simpler. No need to bucket the purchase across players vs franchise' The deductions became slower but broader. You can argue that fifteen years is too short. So, this is not an accidental gap that clever lawyers discovered between two paragraphs of the tax code. That is not a gap in the text. That is the text.

Open on X