Steve Ballmer Buys The Clippers For $2 Billion But Donald Sterling Could Pay A $600 Million Tax Bill

Donald Sterling
Donald Sterling could pay more than $600 million in taxes following the sale of the Clippers to Steve Ballmer. Reuters

The sale of the Los Angeles Clippers to former Microsoft CEO Steve Ballmer will not be the end of the Donald Sterling saga. The $2 billion price tag was the highest ever paid for a NBA franchise and tied the record set by the $2 billion sale of the Los Angeles Dodgers. While there has been much talk about Donald Sterling being a big winner from the forced sale of his franchise, the disgraced owner may have to pay a hefty tax bill.

Sterling bought the Clippers franchise in 1981 for $12.5 million and the franchise was recently valued at $575 million by Forbes. Even at market value, Sterling would have made a tidy profit but when news of the billion dollar bids started surfacing, many felt Sterling would be the biggest winner in the deal.

The $2 billion sale does come with some financial headaches for Sterling, reports MarketWatch. According to Bill Bischoff, he believes Sterling will have to pay $662 million in taxes. Based on how the ownership is set up, Sterling and his wife, Rochelle, will be responsible for federal income tax and state income tax. For the capital gain, how much the team was sold for minus the original price paid for the franchise, there is a 20 percent federal income tax rate, $397.5 million, and the state income tax is 13.3 percent, or $264.3 million, reports Bischoff.  There could be another tax bill down the road and the Sterlings could owe another $531 million in estate taxes.

Following the announcement of Ballmer’s purchase of the Clippers, Sterling has filed a $1 billion lawsuit (see full complaint here) against the NBA for violations for denial of constitutional rights, breach of contract, antitrust violations, conversion and breach of fiduciary duty. Max Blecher, Sterling’s attorney, said the lawsuit will not contest the sale of the Clippers although that could change at a later date.

 

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