Smart TaxesSmart Taxes

Tax dodges by the Dodgers' owner?

In divorce case, wife says couple paid no state or federal tax on $108 million in earnings.

By Kay Bell Mar 2, 2010 11:39AM

Some high, hard pitches are being thrown in connection with a couple of Major League Baseball teams, but they're not part of spring training drills.

 

The nastiest knuckleball so far has been fired by Jamie McCourt.

 

The estranged wife of Los Angeles Dodgers owner Frank McCourt (she contends California's community property law makes her co-owner, a claim the court will decide) has revealed how she says the couple avoided taxes on millions.

 

As part of their divorce proceedings now ongoing in California, she's filed court documents that indicate the couple had joint income of $108 million from 2004 through 2009.

The taxes, both federal and state, paid on that hefty sum? None, nada, zip, zero and nil.

 

Let's just read how Mrs. McCourt's filing explains it:

Furthermore, those funds were not reduced by any income tax obligations because the parties have not paid any federal or California income taxes since they moved to California in 2004.

The italicized emphasis is Mrs. McCourt's. Nice of her attorney to make sure no one missed that proclamation.

 

The paperwork also indicates that the now-feuding couple deliberately structured their business at least partially to allow them to live tax-free. Again, from the filing with the court:

The enormous wealth accumulated by Frank and Jamie McCourt during their 30-year marriage enabled them to live an extraordinarily lavish lifestyle. Their lifestyle was not funded only by the income sources described above. In large part, it was funded in a relatively unique manner -- through a series of capital events, including the "monetization" of future income streams from the parties' businesses. ...

During the marriage, funds, assets and debts were transferred at will among that myriad of inter-related entities, whenever deemed advisable in order to achieve the three primary goals of the McCourt Enterprise: first, to maximize the available ownership distributions to the parties; second, to attempt to ensure that such distributions would not create any income tax liability for the parties; and, third, to increase the overall value of the McCourt Enterprise.

Mr. McCourt's counsel didn't directly dispute the missus' characterizations of the couple's tax planning or the details of their finances, reports L.A. Times business writer Michael Hiltzik. The attorney did, however, call her document filings "selective."

McCourt has said repeatedly that the divorce "has no bearing on the club whatsoever." As more personal and business dealings come to light in that California divorce court, it will be interesting to see if that holds true.

 

Cubs ticket surtax: Just to the east, another MLB tax battle is shaping up involving the Chicago Cubs.

Some Arizona lawmakers want an 8 percent surcharge on spring training games to help pay for the Cubs' new digs in Mesa.

 

Some other clubs that spend baseball's preseason in the Grand Canyon State are calling the move foul.

 

The Cubs' cross-town rivals, the White Sox, and the Arizona Diamondbacks say that their fans shouldn't have to pay higher ticket prices to benefit the Cubs. Major League Baseball also is opposed to the added ticket tax, which is part of a bill that also would add an extra $1 fee on cars rented in Maricopa County where most of the Cactus League teams are headquartered.

 

One of the bill's sponsors says the Cubs deserve the $58 million that the state would contribute to the project because thousands of Cubs fans visit Arizona every spring. Those fans also attend games at other teams' stadiums when the Cubbies visit and spend money there.

 

Another reason Arizona lawmakers are looking to make the Cubs feel at home is that the team is being courted by the cross-country Grapefruit League. Naples, Fla., has been trying to get the team to move its spring training operations there.

 

At this rate, we might see MLB expand team rosters to make room for tax attorneys in the dugouts!

 

Related reading from Don’t Mess With Taxes:

VIDEO ON MSN MONEY

1Comment
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.