Verdi Column: Franchise Values

[Lip Man 1]

Bob Verdi has a column today on the Tribune web site regarding franchise values. Apparently Congress just enacted legislation that has changed the way sports franchises can do business. I post this section of the column that I found interesting. Perhaps the economic / financial / wealthy / business types here at WSI can explain the meaning to all of us regular poor people.

I'm also interested in hearing how this directly impacts Uncle Jerry and the 'small' market franchise known as the White Sox.

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http://chicagosports.chicagotribune.com/images/standard/clear.gifhttp://chicagosports.chicagotribune.com/images/standard/clear.gif
In a single sentence of a 633-page bill, Congress recently approved a measure permitting owners to write off the full value of their franchises over a period of 15 years—an improvement over previous tax laws allowing entrepreneurs to write off only the value of player contracts over three to five years.

"I'm still studying the full implications," said Harvey Wineberg, a famous Chicago expert who has handled financial and IRS matters for a number of notable athletic figures, whether they wear uniforms or silk suits. "But on the face of it, it appears that for owners, this is found money."
Lip

[voodoochile]

Bob Verdi has a column today on the Tribune web site regarding franchise values. Apparently Congress just enacted legislation that has changed the way sports franchises can do business. I post this section of the column that I found interesting. Perhaps the economic / financial / wealthy / business types here at WSI can explain the meaning to all of us regular poor people.

I'm also interested in hearing how this directly impacts Uncle Jerry and the 'small' market franchise known as the White Sox.

"
http://chicagosports.chicagotribune.com/images/standard/clear.gifhttp://chicagosports.chicagotribune.com/images/standard/clear.gif
In a single sentence of a 633-page bill, Congress recently approved a measure permitting owners to write off the full value of their franchises over a period of 15 years—an improvement over previous tax laws allowing entrepreneurs to write off only the value of player contracts over three to five years.

"I'm still studying the full implications," said Harvey Wineberg, a famous Chicago expert who has handled financial and IRS matters for a number of notable athletic figures, whether they wear uniforms or silk suits. "But on the face of it, it appears that for owners, this is found money."
Lip






Well, if you purchase a franchise for $300m, you could write off $20M a year in losses every year for the next 15 years which would translate into about $7-10M a year in tax savings (these are all rough estimates, I am not an accountant). That drops that money directly to the bottom line.

This actually might be a good thing, because the Sox book value is the purchase price - $20M so their tax savings would be well less than $1M per year. It might actually be an incentive to sell the team - or at least shuffle the ownership group.

[Ol' No. 2]

Well, if you purchase a franchise for $300m, you could write off $20M a year in losses every year for the next 15 years which would translate into about $7-10M a year in tax savings (these are all rough estimates, I am not an accountant). That drops that money directly to the bottom line.

This actually might be a good thing, because the Sox book value is the purchase price - $20M so their tax savings would be well less than $1M per year. It might actually be an incentive to sell the team - or at least shuffle the ownership group.That's a good point I hadn't thought of. Because the owner can only depreciate his purchase price and not any increase in value, a team's value may be higher to a new owner, who can then depreciate the full purchase price. In effect, what it does is increase the value of the team. Christmas came early this year.

[Paulwny]

The only thing I've read about the effect of this bill is that it should increase the value of pro franchises by ~ 5%.