|The 'Secret' Behind Magic Johnson's Lakers Sale: The Tax Man|
|by Mike Fisher||Wed, Oct 20, 2010, 07:54 AM|
This week, the world learned that NBA legend Magic Johnson is selling his minority share of the LA Lakers. And there was a mad rush to figure out his motivation for the transaction. Was he transitioning towards a majority ownership position with another NBA franchise? The timing raised eyebrows since his hometown Pistons are looking for a buyer. Or does he have a personal financial crisis? Medical issues?
What's going on?
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.
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.
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.
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.
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