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Lifestyles
The 'Secret' Behind Magic Johnson's Lakers Sale: The Tax Man Print E-mail
by Mike Fisher    Wed, Oct 20, 2010, 07:54 AM

    The first report of the Lakers sale came on Monday. On Tuesday he was back in the news with a report that he's also selling his 105 Starbucks franchises back to Starbucks. According to the LA Times, between the two transactions, he'll net about $100 million.
     The Times further quotes a source who said the sales were done because they were "good business decisions" and that in general he'd like to acquire something "in sports" in the future, but not now. (There were explicit denials that he has any interest in the Pistons, however.)
     One national reporter called it “weird.’’

    “Weird’’ is wrong.
    In our opinion, here’s what’s going on:

    There is nothing mysterious at play and there is nothing calamitous at play. The "good business decision" probably has to do with the upcoming massive federal tax increase in 2011. Federal capital gains tax rates -- in other words, tax on the profits from a sale -- will be one-third more in 2011 than in 2010, and state and local income taxes that mirror the federal bill will also be bumped. Therefore, for assets that have grown in value and will be sold "someday" for that profit, selling in 2010 can be a very astute strategy.

     Our guess is that Magic Johnson was going to eventually sell his piece of the Lakers eventually … quite possibly because he plans to invest in another sports franchise in the future (the LA Dodgers, the NBA, whatever) … so divesting himself of a to-be-sold asset “now’’ rather than “eventually’’ makes terrific financial sense.

    How terrific?

    We bet Magic stands to keep an extra $5-to-10 million in his pocket by making these moves in 2010 instead of in 2011 … and has simply timed his Lakers sale accordingly.

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Comments (2)add comment
...
written by Jonathan Green , October 20, 2010

You know, In the African American Community, we have watched you media outlets tear down African American Athlethes for indiscretions yet, when a married white star player exposes himself to another woman via a cell phone, make unwanted calls to her, white folks don't publicize the behavior and beat the player down like you do African American Players.


...
written by John Brown , October 22, 2010

On the contrary, I see that issue discussed or commented on every 15 minutes. Perhaps because the issue isn't as serious as domestic violence or say...rape, it isn't projected as negatively.



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