Chapter 1 notes

Chapter 1 notes - Chapter 1 notes o Ways in Which an Owner...

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Chapter 1 notes o Ways in Which an Owner can Still Break Even or Do Better, Even with an Operating Income that is Negative or Only Slightly Positive Commonplace for owner to take a salaried job with his team As president or chairman of the board Owner can pay himself whatever he wants Team owners have complex financial interrelationships with their teams Ex: the value of the Cubs’ TV rights can appear as revenue for the team or a part can be shifted to WGN o Which lowers the revenue and hence operating income of the team Ownership of a sports team provides tax sheltering opportunities that aren’t available to most other business So that what appears to be a before-tax loss by the can be converted into an after-tax profit for the owner in certain circumstances Thanks to Bill Veeck in 1950 o Convinced the IRS that the purchaser of a team should be allowed to assign a portion of the purchase price of the team to the player contracts that the team owned and then to treat this as wasting asset Depreciating the contracts over a period of 5 years or less o IRS already had rules allowing teams to write off signing bonuses, scouting costs, losses of minor league affiliates and all other cost incurred by a team in replacing its current roster In effect allowing the team to double-count the cost of replacing players Allowing the owner to convert a pretax book loss to an after-tax profit Owner can also use pretax loss to
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This note was uploaded on 02/10/2012 for the course MGT 101 taught by Professor Staff during the Fall '10 term at Texas State.

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Chapter 1 notes - Chapter 1 notes o Ways in Which an Owner...

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