Revenue Procedure 2019-18: The IRS Been 'Berry, Berry Good' to Baseball and Other Sports Team Owners in Taxing Player Contract Trades

摘要

More than 50 years ago, the IRS confirmed that trades of contracts for professional sports players qualified as like-kind exchanges under Section 1031, thus enabling team owners to avoid recognizing gain or loss on such trades unless cash also changed hands. The playing field changed, however, for trades commenced after December 31, 2017, because the Tax Cuts and Jobs Act limited non-recognition treatment to exchanges of real property only. In Revenue Procedure 2019-18 the IRS introduced, as a rule of administrative convenience, a "safe harbor" under which sports franchises may value player contracts (including draft picks) acquired in a trade at "zero value " for determining gain or loss under the general principles of Section 1001. This article reviews existing guidance for determining adjusted basis in a player contract, including the amortization rules under Section 167 and Section 197; the implications of Revenue Procedure 2019-18; and the limitations on using the "zero value " safe harbor.