I've been getting a lot of questions about how billionaires use sports teams to save hundreds of millions of dollars on taxes, so let me explain. Let's use the Lakers as an example. When the transaction closes, Josh Kushner and Bob Iger will start by allocating 90% or more of the purchase price ($12.5 billion) to intangible assets. Kushner and Iger will then amortize these assets over 15 years under Section 197 of the tax code, allowing them to deduct the amortization against team income. But since these deals are typically structured as pass-throughs, the excess losses don't just vanish. Kushner and Iger can use those losses to shield hundreds of millions of dollars in outside personal income, such as capital gains from VC investments, from being taxed. This is what allowed Steve Ballmer to pay $78 million in taxes on $656 million in income in the year he purchased the Clippers for $2 billion. That's 12%. The tax code has been this way for decades, but what makes sports teams unique is that they are not typical businesses. While no one would argue that it is unfair for a regular business to reduce its taxable income as the value of its machinery, vehicles, and computers erode, most of the assets of a sports franchise regenerate automatically. In other words, player contracts can be amortized even though teams just sign new players when old players leave. TV deals can also be amortized even though leagues just negotiate more lucrative deals when their current ones expire. The tax code even allows for franchise and league membership rights to be amortized even though those rights technically never expire. President Trump's One Big Beautiful Bill actually included a provision that would have reduced the amortization deduction to 50% of the purchase price for new acquisitions. But after NFL owners like Robert Kraft, Jimmy Haslam, and Rob Walton lobbied against it, the provision was removed at the last minute. This proposed change would have only impacted new team sales, but current owners care about it because if the existing amortization advantage goes away or gets diminished, it would negatively impact valuations. Think about it this way: If the amortization deduction drops from 90% to 50%, that would cost potential buyers hundreds of millions in tax savings. So to make up for the difference, team valuations would have to fall. This is also why the Lakers sale is so shocking. Walter is giving up billions in potential tax savings over 15 years for a 20% capital gain over two years. That wouldn't make sense...unless Walter is actually being forced to sell to cover the very loans the federal government is currently investigating him for. P.S. Today's newsletter breaks down everything you need to know about the Mark Walter investigation: why the DOJ seized his phone and laptop, how it triggered a fire sale of the Lakers, and whether the Dodgers, Chelsea, or the Cadillac Formula 1 team will be next. I spent the last 24 hours digging into all the details, and I think this is probably one of our best newsletters ever. READ: huddleup.substack.com/p/did-…