Thursday, September 5, 2019
Kari Smoker (Ithaca College), Alan Pogroszewski (St. John Fisher College), Kyle Stich (AFP Analytics) & Kevin Arnold (Firley, Moran, Freer & Eassa, Syracuse), Pandora's Box Enters the Batter's Box: How the Tax Cuts and Jobs Act's Unintended Consequence Places MLB, and All North American Leagues, in Tax Chaos, 26 Jeffrey S. Moorad Sports L.J. 291-322 (2019):
This Article explores many of the uncertainties created by the new federal tax framework by examining some key issues unique to the business of sports. Section II examines the specific change to Internal Revenue Code (“IRC”) Section 1031 that affects professional sports trades. Section III looks at MLB’s unique standing in the business world since securing a rare antitrust exemption almost a century ago that it has maintained, more or less, through legislative and judicial acquiescence. Section IV examines Section 1031 like-kind exchanges, why such transactions were initially tax-exempt, the IRS’s somewhat surprising proclamation that MLB trades qualify as 1031 exchanges, and how the IRS may have turned a blind eye to enforcing Section 1031’s technical rules and reporting requirements for professional sports trades. Section IV also outlines the new tax law, how it potentially impacts all major league sports, and some of the complexities involved.
Section V takes a practical look at valuation and how it poses a particular challenge in enforcing the new tax law. Finally, Section VI outlines the safe harbor rules issued by the IRS for the calculation of gain or loss on professional sports trades.