View Single Post
Old
11-25-2012, 08:49 AM
  #5
barneyg
Registered User
 
Join Date: Apr 2007
Posts: 2,222
vCash: 500
Quote:
Originally Posted by CGG View Post
When he sells the team he pays capital gains taxes on the difference between the sale price ($150 million) and the net book value of the asset ($0, since it has been depreciated). Now he has a $150 million gain, but pays a much lower tax rate on this (around 20%?) so the tax bill at sale is $30 million.
I don't know the specifics of the US tax code but in Canada, the tax implications of buying/selling a team would be dependent on the legal structure of the deal i.e. whether the buyer bought the actual assets of the team or the shares of the holding company that holds the team. It's actually a pretty standard tax problem in Canadian tax.

If the buyer bought the assets, he would benefit from a similar (not identical) depreciation expense during x years but there would be a recapture of CCA (i.e. the depreciation expense would be reversed) at the sale. So taxes would be deferred but not minimized, and it would be tougher for the owner to use the losses from the hockey team to offset profits from other businesses. (Canadian rules are more stringent than US rules on that, although there are workarounds.)

If the buyer bought shares he could not depreciate anything but would not be taxed on a big capital gain at the sale. So none of the positive impacts you mentioned would apply.

barneyg is offline   Reply With Quote