The new tax law is supposed to be good for Americans. Yet, in an interesting twist, it could have a devastating impact on America’s favorite pastime.
How could the tax law impact baseball? A publication from Minnesota Public Radio recently addressed the potential for a problem. The issue involves the definition of a single term: “real.”
Previous tax law allowed for businesses, like the Major Baseball League, to exchange assets without tax consequences. Now, the same types of exchanges are limited to those that involve the exchange of “real property.”
How will this provision translate to a tax hit? The issue hinges on whether or not the Internal Revenue Service (IRS) will consider a baseball player as real property. If not, the transfer would result in a capital gains tax.
Is MBL the only business at risk? No. The provision could impact any sport. However, baseball operates early in the year and will likely be the first to test this provision.
What can the Average Joe learn from this potential issue? The tax proposal was pushed into law relatively quickly. As a result, a number of provisions are coming into question. The true application of these provisions remains unknown.
Although this piece touches on the impact to baseball players it shines a light on the bigger issue: the impact of the tax law is not fully known. A misinterpretation could result in serious issues. Serious issues with taxes can result in an audit from the Internal Revenue Service (IRS).
It doesn’t matter if you are a baseball player or the Average Joe, an audit can happen to anyone. Those who are the subject of an audit are often wise to seek a consultation with an attorney. An attorney experienced in dealing the tax authorities and appeals officers can review your returns and help to mitigate any potential tax issues.