Remember how casual Steve Ballmer seemed about spending $2 billion for the Los Angeles Clippers -- almost three time the previous record sale for any NBA team?
It's probably because he knew a hidden discount was waiting for him.
A new report in the Los Angeles Times reveals that various provisions in tax law will allow Ballmer to deduct huge portions of the cost of the team as a tax write-off -- amounts that could cover almost half of the cost of the purchase, according to experts.
Ballmer was well aware of that potential, having exercised the benefit of tax deductions through several acquisitions at Microsoft.
Estimating the exact amount of the tax write-off will be difficult because the tax laws in question are open to interpretation, meaning Ballmer's representatives will likely negotiate for the largest write-off they can swing.
Some of the most inventive write-offs will be for the contracts of players like Chris Paul and Blake Griffin. According to the Times, Ballmer will likely try to write off amounts much larger than their considerable salaries and argue that the value of the players is much larger than their base incomes because of the revenues they generate for the team, including merchandise sales and game tickets.
Ballmer's strategy is not unique to professional sports -- such deductions have been taken for decades. But in setting the record for the highest purchase price for a sports franchise, Ballmer does stand to inherit the largest tax write-off for such a splurge.
In other words, the rich get richer.
But it will be interesting to see how the Clippers' sunny financial situation impacts the NBA's collective bargaining negotiations in 2016.
The players' representation has already pointed to the massive valuation of the Clippers -- and, by extension, every other NBA team -- as evidence that league owners are in great financial shape.
Players want a bigger cut of the profits, especially with a multi-billion dollar television contract recently signed. In the last collective bargaining process, NBA owners cried poor and pointed to distorted accounting work as evidence. Now, everyone knows that was a crock.
When that time comes, will Ballmer be so eager to open his checkbook?
