Donald Sperling

A wicked thought struck me, as I was getting my morning coffee and bagel.

What if the Sperling racism allegations were really a tax avoidance conspiracy conducted with the full assistance of the NBA?

I’m thinking: here is a man in his 80’s with a billion dollar asset – albeit it is in a family trust, but a sale is still a sale – which the family wishes to dispose of, or partially liquidate.

What nicer way than to have a nonsensical charge leveled against him – based on a private conversation which is technically illegally released to the public; one in which he actually does not say anything racist, but which is given a racial spin by the other party to the conversation – his long-time and valued personal assistant.

Consider the possible effect of involuntary conversion treatment of a BILLION DOLLAR PROFIT.

“An involuntary conversion occurs when your property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and you receive other property or money in pay­ment, such as insurance or a condemnation award. Involuntary conversions are also called involuntary exchanges.”  [Generally, you do not report the gain if you receive property that is similar or related in service or use to the conver­ted property. Your basis for the new property is the same as your basis for the converted prop­erty. This means that the gain is deferred until a taxable sale or exchange occurs.  … If your net condemnation award is more than the adjusted basis of the condemned property, you have a gain.]

Basically, Sperling is being forced to sell at the appraised value – no profit or loss can be inferred.  Therefore the sale is, in theory, tax neutral.  However, if the actual sale is below the appraised value, the sale generates a loss to be applied against other income – netting no only the cash, but also a tax benefit against other income. … basically the Nation pays for Sperling to acquire a Billion Dollars in cash for alternate investment.  Since the owner of the team is a trust, and not Sperling personally, his lawyers would have ample grounds to contend that the transaction is indeed a forced sale exclusive of any action of the owner of record.  As the wife has an interest in the trust, and is not a party to the Racist allegation, she is a injured third party – again offering legal argument to support the tax treatment.

Basically, the only tenable argument the government would have in fighting any involuntary exchange treatment would be to charge the NBA with conspiracy to defraud the government. … which appears to be exactly what they are doing.