Donald Sterling’s attempted ownership to transfer sparks questions about league response, tax implications

Los Angeles Clippers owner Donald Sterling, left, and his wife Rochelle look on during the second half in Game 3 of an NBA basketball playoffs Western Conference semifinal against the San Antonio Spurs, Saturday, May 19, 2012, in Los Angeles. The Spurs won 96-86 for a 3-0 series lead. (AP Photo/Mark J. Terrill)

Los Angeles Clippers owner Donald Sterling, left, and his wife Rochelle look on during the second half in Game 3 of an NBA basketball playoffs Western Conference semifinal against the San Antonio Spurs, Saturday, May 19, 2012, in Los Angeles. The Spurs won 96-86 for a 3-0 series lead. (AP Photo/Mark J. Terrill)

Below is a select Q&A with USC law & business professor Michael Chasalow surrounding Donald Sterling’s attempt to transfer Clippers’ ownership to his wife, Shelly:

On the latest development


Chasalow:
The only thing I see significant with that is he is saying she has the authority to negotiate a sale on his half. He may still have a right to approve a sale in the end. The real idea is if there’s going to be a sale that he’s basically he won’t be involved with the process. If he’s involved in the process, there will be other concerns. So he’s saying he’ll take himself out of the process since he is clearly an inflammatory personality. That makes it more likely that the NBA will work with them on a voluntary sale. They want the team sold and to have a new owner in place.

What are the tax implications?

Chasalow:We don’t know all the circumstances. Just understanding how capital gains tax, if they bought the team for $12 million and it gets sold for more than a billion dollars, there’s going to be a huge tax bill. That’s going to happen with the sale of the team. Selling the team results in significant tax burden that might not happen if it’s stayed in a family trust and passed down to their children. It would at least be greatly reduced. If you assume the capital rains rate is 15-20 percent, you’re talking well over a hundred million dollars in tax.

What other legal implications could emerge from this this development?

Chasalow: The interesting question is what’s going to happen between now and June 3. Just because the Sterlings they’re willing to sell doesn’t mean the NBA will say, ‘Oh okay. Thank goodness. Now we’re not going to do anything else.’ The NBA announced it’s preceding with its meeting. The question is if before June 3, the NBA and the Sterlings can work out an arrangement that sets up a procedure for a voluntary sale so that the NBA puts off its process to force the Sterlings to sell. Or maybe they still have the meeting, but delay the implementation of a forced sale pending a voluntary sale. Or they could ignore it completely. But I think it’s in everybody’s best interest to have a voluntary sale. The NBA realizes that too so if there is a way to arrange that, they’re probably going to want that. But they will want a seat at the table. The NBA also gets to approve any sale.

After June 3, what do you envision the process being?

Chasalow: A good process would like an organized process through which interested buyers will submit bids. Then you will have a group of people, initially just the Sterlings and the NBA will be involved in looking over the bids and selecting a group of people to purchase the team and seeking approval once everybody has agreed upon the right purchaser. That’s if things go well. If things don’t go well, they may just wind up in litigation and the drama will keep unfolding.


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USC law professor provides perspective on Donald Sterling transferring Clippers’ ownership to Shelly

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