Don't Mess With Taxes

Spring training games are wonderfully leisurely, at least for the fans. But Major League Baseball is a big business and some of its practices could be negatively affected by the new tax law. (Photo courtesy Central Florida Visitors & Convention Bureau)

One of the good things about tax-filing season's timing is that it and Major League Baseball's spring training overlap a bit.

That means when my head is about to explode from the hassles of taxes, I can take a break and catch some of the Boys of Summer preparations.

The February and March games in Florida and Arizona are great distractions. But while we fans at Grapefruit or Cactus League games are just soaking in the sun and enjoying the mad skills of MLB's current and future stars, the pre-season matches are a key part of the sport's business.

Coaches, managers and owners must decide who makes the teams. 

Tax troubles for trades: Part of that team honing process also often means, much to the dismay of us fans, trading away our favorite players.

Such trades, however, could be hampered by the recently enacted new tax laws, according to an Accounting Today article that gets this weekend's Saturday Shout Out.

"Changes in the rules for like-kind exchanges under the Tax Cuts and Jobs Act (TCJA) may lead professional sports teams to trade fewer players, according to some tax experts," writes AccountingToday.com's Editor-in-Chief Michael Cohn.

The snag is the TCJA's changes to the Internal Revenue Code's Section 1031, which covers what is commonly referred to as like-kind exchanges of business property.

Under the new tax law, notes Cohn, sports teams that trade players are effectively trading those players' contracts, which are regarded as assets for tax purposes.

"That means teams would have to pay taxes every time they traded players and could not use the old rules under Section 1031 of the tax code for like-kind exchanges to make the trades on a tax-free basis," according to Cohn and the tax professionals he spoke with for the article.

Real estate trades only: Why? The new tax law amended Section 1031 so that it now applies only to certain real estate deals now.

"So you can't apply 1031 to player trades anymore," Brett Cotler, an associate at the New York law firm Seward & Kissel LLP, told Cohn.

Seward & Kissel doesn't specialize in sports law, but its tax attorneys say they've heard the new law is prompting some concern in the pro sports world. The New York Times looks at how the new law has thrown a curveball to player personnel (and tax) staff on MLB teams.

As the reality of the TCJA like-kind changes sinks in at professional sports league offices across the country, I suspect a lot of major league player-personnel folks will put tax attorneys on speed dial.

This and next couple of weekends though, I'm just going to take advantage of the spring training/tax juxtaposition and enjoy the pre-season prowess of World Champion Houston Astros players like Justin Verlander, Carlos Correa and top prospect Kyle "Ted" Tucker. 

You also might find these items of interest:

• 6 MLB teams must pay $74 million in total luxury taxes
• America's pastimes: Baseball, ballpark proposals and taxes
• Lawmaker goes to bat for Texas Rangers' ballpark tax break