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Anybody think this is the reason why Ralph's kids don't want the team?
It's Friday, April 14, and you know what that means. It means we've got one day left (OK, the weekend; they're giving us 'til Monday at midnight this year) to find that elusive loophole in the Internal Revenue Service tax code before we have to get a postmark on our annual returns. It happens every spring.
But for some of the wealthiest Americans, it's happening every spring, summer, autumn and winter. And their search for ways around the tax burden often requires creative strategy and long-term planning that make our annual rasslin' matches with Form 1040 amount to something less than a hill of bean-counting.
It's pretty hard to mail in an envelope when you're dead.
As the value of professional sports teams has escalated, the smart owner who might be a little long of tooth and has a desire to keep the franchise in the family is worrying about estate taxes. Currently, those taxes are levied on estates valued at more than $4 million, which pretty much means they're a factor for every franchise owner in pro sports.
In 1960, Lamar Hunt bought the Kansas City Chiefs for $25,000. Thirty seven years later, Hunt transferred 80 percent of the team to his daughter and three sons. While he had to pay a gift tax equal to the estate tax -- then 55 percent -- he paid that tax based on the value of the team back then. According to Financial World Magazine, the team's value in 1997 was $188 million.
"It's something I thought about doing for a number of years," Hunt told the New Orleans Times-Picayune in 2000. "If I was real farsighted, I would have done it when the franchise was worth $10 million. But for some people, it's hard to think in terms of dying. They don't want to admit it could happen to them at any time. In that sense, I was a foot-dragger."
Even still, executing the plan when he did saved his heirs hundreds of millions of dollars. Today, Forbes Magazine values the team at $762 million.
If an owner who has 100 percent of the team in his name passes away this year, and if his children wish to inherit and own that team, they will be required to pay federal estate tax equal to a whopping 46 percent of the value of the franchise. In the case of an NFL team, that could amount to fortune in and of itself.
But for some of the wealthiest Americans, it's happening every spring, summer, autumn and winter. And their search for ways around the tax burden often requires creative strategy and long-term planning that make our annual rasslin' matches with Form 1040 amount to something less than a hill of bean-counting.
It's pretty hard to mail in an envelope when you're dead.
As the value of professional sports teams has escalated, the smart owner who might be a little long of tooth and has a desire to keep the franchise in the family is worrying about estate taxes. Currently, those taxes are levied on estates valued at more than $4 million, which pretty much means they're a factor for every franchise owner in pro sports.
In 1960, Lamar Hunt bought the Kansas City Chiefs for $25,000. Thirty seven years later, Hunt transferred 80 percent of the team to his daughter and three sons. While he had to pay a gift tax equal to the estate tax -- then 55 percent -- he paid that tax based on the value of the team back then. According to Financial World Magazine, the team's value in 1997 was $188 million.
"It's something I thought about doing for a number of years," Hunt told the New Orleans Times-Picayune in 2000. "If I was real farsighted, I would have done it when the franchise was worth $10 million. But for some people, it's hard to think in terms of dying. They don't want to admit it could happen to them at any time. In that sense, I was a foot-dragger."
Even still, executing the plan when he did saved his heirs hundreds of millions of dollars. Today, Forbes Magazine values the team at $762 million.
If an owner who has 100 percent of the team in his name passes away this year, and if his children wish to inherit and own that team, they will be required to pay federal estate tax equal to a whopping 46 percent of the value of the franchise. In the case of an NFL team, that could amount to fortune in and of itself.
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