question archive Prior to the 2017 Tax Cuts and Jobs Act [Pub
Prior to the 2017 Tax Cuts and Jobs Act [Pub
Subject:LawPrice: Bought3
Prior to the 2017 Tax Cuts and Jobs Act [Pub. Law No. 115-97], most sports teams treated player and coach contracts (which are personal property) that could be taxed under IRC § 1031 "tax-free exchange" rules when players and coaches were "traded" to another team. [When a team trades a player or coach, what really happens is that they exchange the contract to another team for a contract owned by the other team, with cash going one way or the other as "boot". The player or coach just goes with the traded contract.]
So, what is really happening is that they trade contracts and not people. The 2017 Act eliminated the use of §1031 for personal property. Something new has come along.
Facts:
Trade No. 1:In 2018, the Dallas Cowboys traded offensive lineman Otto Lennon to the Detroit Lions for their free safety Mercury Morton. No cash was involved.
Facts:
Trade No. 2: In 2018, the Cowboys also traded quarterback Quincy Brown to the New England Patriots in exchange for free safety Fred Smith. The Cowboys also paid New England $100,000.00 as part of the trade.
Facts:
Trade No. 3: In 2018, the Cowboys also traded wide receiver Warren Rich to the New York Giants in exchange for their place kicker, Paulo King. New York also paid the Cowboys $90,000.00 as part of the trade.
Questions:
Find the applicable new law covering these sports team trades, summary of how the "safe harbor" works and the give a one or two line answer to the tax effects of Trades 1 through 3.
