by Robert Reich, about Sterling's 'gain,' and tax conseqences
Donald Sterling will be grousing about his sale of the LA Clippers to Steve Ballmer for $2 billion all the way to the bank. According to the New York Times, Sterling bought the team for $12.5 million in 1981. That's a 15,900% gain over those 33 years, for an annual return of 16.6% -- not even counting his share of profits earned during those years. He and his estranged wife will probably avoid paying taxes on this windfall through a trust that holds the money while they take out their living expenses. When they die, their heirs will continue to avoid taxes on these gains by using a rule in the tax code that raises the value of all assets to the market price at the time of the benefactors’ death -- thereby eliminating all taxable gains (the so-called “stepped-up basis at death” rule). Ballmer will surely use the same techniques to avoid paying capital gains taxes on most of his Microsoft stock, which already has appreciated 55,700% since Microsoft’s public offering in 1986.
When it comes time for this country to get serious about tax reform, these and other billionaire loop-holes need to be shut.
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