The Los Angeles Lakers’ proposed $12.5 billion sale to Josh Kushner and Bob Iger isn’t only a historic sports transaction. It also highlights one of the most valuable financial advantages available to owners of professional sports franchises: the ability to generate substantial tax deductions from the purchase of a team.
Kushner and Iger have agreed to acquire the Lakers from Mark Walter in a deal valuing the franchise at approximately $12.5 billion. The transaction still requires NBA approval. (Reuters)
While the precise tax structure of the Lakers transaction has not been publicly disclosed, buyers of professional sports franchises can potentially allocate large portions of their purchase price to intangible assets and amortize qualifying assets over 15 years.
That can create hundreds of millions of dollars in annual deductions even while the underlying sports franchise continues increasing in value.
How Do Sports Team Owners Get Tax Deductions?
The key concept is amortization.
When someone purchases a business, the purchase price is generally allocated among the assets being acquired.
For a professional sports franchise, much of the value can reside in intangible assets rather than physical property. Depending on the transaction and applicable tax rules, those assets can include items such as:
- Player contracts and related rights
- Media and broadcasting rights
- Sponsorship relationships
- Intellectual property
- Franchise-related rights
- Other qualifying intangible assets
Under Section 197 of the Internal Revenue Code, many acquired intangible assets can generally be amortized over 15 years.
In simple terms, the owner can deduct a portion of the qualifying acquisition cost each year rather than waiting until the franchise is eventually sold.
What Could That Mean for the $12.5 Billion Lakers Sale?
The potential numbers become enormous when applied to a franchise as valuable as the Lakers.
Suppose, purely as an illustration, that $11.25 billion — 90% of a $12.5 billion purchase price — ultimately qualified for 15-year amortization.
Dividing $11.25 billion by 15 would produce approximately:
$750 million in potential annual amortization deductions.
That does not mean Kushner and Iger will automatically receive a $750 million annual deduction. The actual figure would depend on the final purchase-price allocation, ownership structure, tax basis and other provisions of federal tax law.
The final tax treatment of the Lakers transaction has not been publicly established.
But the example demonstrates why the tax treatment of sports franchise acquisitions can be extraordinarily valuable.
Why Can a Profitable Sports Team Show a Tax Loss?
This is where sports ownership becomes particularly interesting.
Amortization is a non-cash expense.
A franchise could therefore generate positive cash flow from ticket sales, media agreements, sponsorships, merchandise and other revenue while simultaneously reporting substantially lower taxable income because of amortization deductions.
In some circumstances, those deductions can contribute to the business reporting a loss for tax purposes even though its underlying economics are considerably stronger.
This phenomenon has previously been documented across American professional sports.
A ProPublica investigation found that owners across the NFL, NBA, NHL and MLB had used substantial amortization deductions associated with their franchises. (ProPublica)
Steve Ballmer and the Clippers Provide a Famous Example
One of the best-known examples involves Los Angeles Clippers owner Steve Ballmer.
Ballmer purchased the Clippers for approximately $2 billion in 2014.
According to tax records analyzed by ProPublica, the Clippers subsequently reported approximately $700 million in tax losses from 2014 through 2018, despite evidence indicating that the franchise’s underlying business was often profitable.
ProPublica estimated that Ballmer’s Clippers ownership reduced his federal tax bill by approximately $140 million over five years. (ProPublica)
That distinction is important.
A tax loss does not necessarily mean the owner actually lost that amount of cash.
Accounting and tax deductions can produce dramatically different results from the economic performance of the franchise.
Can Sports Team Losses Offset an Owner’s Other Income?
Potentially, but this part is more complicated than simply saying that every dollar of a team’s tax loss can automatically erase an owner’s unrelated income.
Many professional sports ownership structures operate through pass-through entities, meaning taxable income or losses can flow through to individual owners.
Whether an owner can actually use those losses against income from other investments depends on numerous rules, including the owner’s basis, amount at risk, participation in the business, passive-activity restrictions and the character of the income being offset.
That means claims that Kushner or Iger will automatically be able to use Lakers deductions to eliminate taxes on unrelated investment income should be treated cautiously until the actual ownership and tax structure becomes known.
Why Are Sports Teams So Valuable for Billionaires?
Tax deductions are only one part of the financial appeal.
Professional sports franchises have also experienced extraordinary appreciation.
The Lakers demonstrate that trend particularly well.
Walter acquired control of the Lakers in 2025 in a transaction that valued the franchise at approximately $10 billion. Less than a year later, the proposed Kushner-Iger transaction values the team at $12.5 billion. (Reuters)
That creates an unusual combination for wealthy investors.
An owner can potentially receive substantial annual tax deductions based on assets that are treated as declining in value for tax purposes while the overall franchise itself becomes considerably more valuable.
Why Does the Tax Code Allow This?
The basic concept isn’t unique to sports.
Businesses routinely deduct the declining value of assets.
Physical assets such as machinery, vehicles and equipment generally wear out and eventually need replacement. Tax law therefore allows businesses to recognize that decline through depreciation.
Intangible assets are handled through amortization.
Sports franchises present an unusual situation because many of their valuable assets can continually regenerate.
A player contract eventually expires, for example, but the franchise signs another player. A media agreement expires, but another broadcasting agreement can replace it.
Meanwhile, scarcity — there are only a limited number of NBA, NFL, MLB and NHL franchises — has helped push overall team valuations dramatically higher.
Sports Ownership Can Create a Powerful Tax Advantage
The Lakers’ proposed $12.5 billion sale provides a timely illustration of why professional sports franchises attract some of the world’s wealthiest investors.
Owning an NBA team offers prestige, scarce-asset ownership and exposure to potentially significant long-term appreciation.
But the tax treatment can make the economics even more attractive.
A new owner may be able to amortize qualifying intangible assets over 15 years, potentially generating enormous deductions during the early years of ownership.
The Lakers’ actual deductions will depend on how the Kushner-Iger acquisition is ultimately structured, so it would be premature to claim that the buyers will receive a specific tax benefit.
Still, history shows that the tax advantages available to professional sports owners can be worth hundreds of millions of dollars.
For billionaires buying increasingly valuable franchises, that’s another major reason why owning a sports team can be much more than a trophy investment.