Fortune’s Jason Ma here. Thrive Capital founder Joshua Kushner is no stranger to investing in pro sports, but his $12.5 billion deal with former Disney CEO Bob Iger to buy the Los Angeles Lakers vaults him into an elite club with elite benefits.
Kushner previously owned a minority stake in the Memphis Grizzlies, then sold it and bought a small stake in the Miami Heat, which he must sell to buy the Lakers. And earlier this year, he bought a minority a stake in the San Francisco Giants. If the Lakers deal is approved, however, Kushner and Iger will own about 83% of the iconic NBA franchise after the Buss family agreed to sell its share. (Jeanie Buss, however, is legally contesting her siblings’ plan to sell the stake.)
The new owners can bask in the aura of the Lakers’ storied history, celebrity fans, and overall glitz. But there’s another perk: Sports teams have long been considered great tax shelters for wealthy individuals, allowing billionaires to save hundreds of millions of dollars. “It’s a powerful tax shield,” Ram Ahluwalia, founder of Lumida Wealth Management, posted on X over the weekend. “My guess is he is preparing to offset a boatload of carried interest income. If you own a sports team, done correctly, you can get a deduction against income.”
He pointed out that Kushner is likely facing big gains from his holdings in SpaceX, OpenAI, and Stripe. Meanwhile, tax deduction benefits from owning a team are more favorable than owning real estate. By amortizing key assets like media rights and treating other assets as depreciable like contracts and the stadium, team owners can lower their tax bills. That’s possible even as a team appreciates in value while its actual business operations are also profitable.
For example, a team’s roster of players can be counted as an intangible asset that depreciates over time, generating hefty paper losses that offset an owner’s taxable income elsewhere. In fact, as much as 80% of the value of a team is comprised of intangibles. That includes the so-called goodwill that high-quality brands enjoy.
Sports industry analyst Joe Pompliano predicted that as soon as the Lakers deal closes, the new owners will allocate 90% or more of the price tag 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,” he said on X last week.
See you tomorrow,
Jason Ma [email protected]
Submit a deal for the Term Sheet newsletter here.
Joey Abrams curated the deals section of today’s newsletter. Subscribe here.
The post One of the VC world’s biggest stars is doubling down on sports in a big way, and there’s a compelling tax reason behind the strategy appeared first on Fortune.
