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IRS Allows Pro Sports Teams To Make Tax-Free Trades

Professional sports teams can once again trade players, staff and draft picks without negative tax consequences as long as they don’t receive cash in the trade, the Internal Revenue Service announced Thursday.

The announcement softens the impact of a change introduced in the Tax Cuts and Jobs Act that limited the exchange of assets without taxable gain to real estate transactions. Professional sports teams used to be able to take advantage of such “like-kind exchanges” prior to the TCJA’s enactment.

Michele J. Alexander, a tax attorney at Bracewell LLP, said the IRS’ new guidance is a way to allow teams to make trades the way they did before the TCJA was passed.

“Hopefully, this is a sign that the IRS is looking to mitigate the harsh results that stem from limiting the like-kind exchange rules, though sports teams in particular have difficult issues when it comes to valuation,” Alexander said.

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