As if having a backlog of creditors (including Shawon Dunston!) banging on the door at Wrigley Field asking for money wasn't bad enough for the Cubs ownership, it seems as if the IRS may have the last word on their upcoming sale. Tribune Co. owner Sam Zell, who probably hates angry black folks as much as everyone in Chicago, is trying to avoid paying over $300 million in taxes by forming a leveraged partnership with the Ricketts family and retaining a small percentage of ownership.
This is nothing new; we knew about the possible tax dodge back in November of last year. But losing $300 million in tax revenue is not something the IRS takes lightly, so those nerds may bust out the slide rules and law books to figure out a way to challenge the faux 'partnership'.
I'll let menschy Wall Street Journal bizniss columnist Allan Sloan explain:
Now Zell is trying to get around the problem he created when he converted Tribune from a standard C corporation to an S corporation to avoid taxes. Firms making that switch owe corporate gains taxes if within 10 years of the change they sell assets, such as the Cubs, in which they had "built-in gains."
Hence Zell's nonsale sale of the Cubs, which would work like this. The Ricketts family, founders of Ameritrade (now TD Ameritrade), would put $150 million of cash into a partnership that would also borrow up to $698 million. Tribune would put the Cubs, Wrigley Field and related assets into the partnership.
Tribune would emerge with $740 million of cash and 5 percent of the partnership, while the Ricketts family would have 95 percent and operating control. Call me naive, but it sure seems to me that when you start with 100 percent and full control and end up with 5 percent, $740 million and no control, you've sold 95 percent.
Sounds like a scam to me, but I doubt Sam Zell has a better option. He overpaid for an unprofitable business in a dying medium and now wants to escape with some sheckels still in his grubby mitts. It's almost surprising that the Cubs have been competitive while operating as a tax shelter for a newspaper company the past two years. It probably doesn't surprise the IRS since Zell tried this once before. Last year, he unloaded 97% of the New York Newsday paper to Cablevision and waltzed away with 650 million untaxed simoleons. C'mon Zell, share with the rest of us. We need our Obamacare!