My last post on this topic is looming prophetic, as reflected in almost hourly developments in the Donald Sterling saga.
It appears that battle lines are being drawn and sabers being rattled as Donald Sterling has recently filed a formal and aggressive answer to the National Basketball Association’s charges against him.
Mister Sterling, through his attorneys, is challenging the NBA’s actions on several fronts and is posturing to “storm the NBA castle.”
It appears that his principal challenge is that the recording which his girlfriend V. Stiviano made was illegal under California law. While that recording could not the used in a court of law, the NBA is claiming that its internal dispute resolution mechanisms are not bound by formal rules of evidence. He is also claiming that the NBA’s action is unprecedented and grossly disproportionate with other punishments the league has meted out over its history for conduct detrimental to its image. Sterling is also arguing that his rights to privacy, due process of law and fundamental fairness are being eviscerated and cannot be contracted away by any private organization, as the NBA is apparently claiming.
The bottom line, like almost all conflicts, involves money. There are been a variety of prospective purchasers and groups lining up to purchase the franchise, and potential bids are reported to range from between 1 billion to $2.5 billion for a team that Mister Sterling purchased for a fraction of that ( $12 million dollars) in 1981.
As one might expect, the reaction from the league, current and former players, and other personalities involved is in uniformly staunch opposition to Mister Sterling’s claims, position, and his continued association with the NBA..
While none of us likes to be separated from our hard earned income, most millionaires (and billionaires) are particularly tenacious about holding onto their fortunes. They have the time, resources and funding to defend their turf and principles when most other people lack the ability to do so.
Perhaps one of the more interesting arguments that Mister Sterling is making is that a forced sale of his property, would serve to incur significant tax liability for his family, as a result of capital gains taxation. “beginning in 2013, a new 20% rate on net capital gain applies to the extent that a taxpayer’s taxable income exceeds the thresholds set for the new 39.6% ordinary tax rate ($400,000 for single; $450,000 for married filing jointly or qualifying widow(er); $425,000 for head of household, and $225,000 for married filing separately). For more information, refer to Publication 505, Tax Withholding and Estimated Tax.” (Quoted from IRS Tax Topics, Topic 409 available at IRS.gov).
Although I am certainly not an accountant, and have only passingly familiarity with various accounting mechanisms and procedures, it appears that this tax could potentially involve hundreds of millions of dollars if the rumored sale prices are in fact agreed upon.
So ironically the Federal government stands to reap perhaps the second biggest windfall in this entire episode, and is rubbing its hands in glee while staying far above the actual fray.
So buckle up and stay tuned, because this one looks like it is going to be a doozy.