You're killing me, Smalls!

It’s that time of year again and Aaron, our resident baseball expert, is champing at the bit for the upcoming season.  On the other hand, the trades of Gerrit Cole and Andrew McCutchen might make this a sore topic for many Pirates fans out there, but it is precisely those trades that make 2018 an interesting year for baseball.

I know we have covered the tax reform ad nauseam but there has been in interesting revelation.  The new law made a clarification in a small section the tax code that primarily applies to farmers, manufacturers and other businesses, but could have a much larger impact that initially expected.  The old version of the law allowed businesses to swap assets like trucks or machinery without having to pay taxes but, by adding the word “real” to the code only real estate trades are exempt.  So now I am sure you can see where I am going with this.

There is a real possibility that because of this change in the tax code professional sports franchises will have taxes levied on player trades.  So, using the example from earlier, teams like the San Francisco Giants or the Houston Astros who acquired McCutchen and Cole for lesser players or prospects might have to pay capital gains tax on the difference of the player(s) acquired, to those given up.  Right now, the question professional sports leagues and teams are struggling with is how does one place a fair market value on a player, especially when the value of the player may not be tied directly to their contract.

In all seriousness the likelihood of this actually taking place seems pretty slim.  While this could be a major generator of tax revenue for the government the logistics are complicated, and it could fundamentally change sports as we know it, which might not be such a terrible thing.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.