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Lockout

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Re: Lockout 

Post#121 » by marthafokker » Wed Jul 6, 2011 10:46 pm

Sleepy51 wrote:Not a huge fan of publicly traded REITs. Real Estate is not supposed to behave like a stock. Trading real estate stocks instead of real estate holdings makes it take on some of those characteristics.


I am referring to non-trade-able REIT. Do not need to worry about the stock market behaviors.
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Re: Lockout 

Post#122 » by Sleepy51 » Thu Jul 7, 2011 12:28 am

marthafokker wrote:
Sleepy51 wrote:Not a huge fan of publicly traded REITs. Real Estate is not supposed to behave like a stock. Trading real estate stocks instead of real estate holdings makes it take on some of those characteristics.


I am referring to non-trade-able REIT. Do not need to worry about the stock market behaviors.

Then well played sir! I am a much bigger fan of non-traded REITs. Liquidity risk I can live with. I don't want to deal with price volatility for that asset class, especially in this environment. Plus the upside on exit strategy has historically been very good on well run private REITs.
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Re: Lockout 

Post#123 » by Sleepy51 » Thu Jul 7, 2011 12:32 am

250mm of the league's claimed loss is directly attributed to the roster depreciation tax break. They are cash flow positive. The tax code gives them an EXTRA benefit of offsetting positive cash flow with a specious depreciation allowance. The league is not losing money and simultaneously selling franchises for record prices. The entire claim of losses is a sham. The only people who believe it are those who want to believe it.
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Re: Lockout 

Post#124 » by floppymoose » Thu Jul 7, 2011 12:46 am

check and mate.
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Re: Lockout 

Post#125 » by Twinkie defense » Thu Jul 7, 2011 4:51 am

Do you have any source for that?

From the League:
“the notion that $250 million of losses is due to `accounting procedures’ is patently false and so vague an assertion as to be meaningless as a matter of financial analysis.
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Re: Lockout 

Post#126 » by Sleepy51 » Thu Jul 7, 2011 5:39 am

There is primary source data available on this and linked previously in this thread that does not require spin ir massaging by the league or players association. People with their tit caught in a wringer deny things all the time.

The Roster depreciation Allowance allows the owner to expense 100% of the purchase price of the team over 15 years as a consequence of the hypothetical depreciation of the roster. Aside from the fact that "rosters" do not actually depreciate as aging talent is replaced through draft and free agent acquisitions, this dog s :censored: corporate welfare tax break is also double dipping because player salaries are a deductible expense against income already. It is a sham. It is legal, but it is a paper loss that is used to offset positive cash flows during the 15 year period following acquisition of the team. That depreciation allowance is also a financial ASSET which increases the book value of the team at sale.

Real cash flows are reduces for tax purposes by this allowance, but it is not a payable. It is essentially a tax credit. But wait...there's more! Apparently if the team is owned as a pass through (s-corp) then an owner who shows a tax loss due to this RDA can use the team as a legal tax shelter against OTHER income. It represents MORE money to owners but shows a financial statement as an expense because that is how accounting and taxes work. Depreciation and oher write offs do not always correlate to actual cash flow e penditures. It's a wee bit different than filing your 1040ez.

These are objective facts and are verifiable by reading the applicable tax code and field guidance bulletins or numerous economic analysis published on the subject.

Note: The RDA is not the 25MM Loss in the Nets 2004 financial statement. It appears that the allowance was not taken in 04. Deadspin corrected this. The allowance was taken on both 05 and 06 statements. It is shown as an expense of about $40MM each year.
http://www.scribd.com/doc/59074529/Nets-0506


Being able to read a financial statement (after a 2nd look) and the tax code >>>>>>>>>>>>>>> regurgitating partisan press releases.
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Re: Lockout 

Post#127 » by Sleepy51 » Thu Jul 7, 2011 2:25 pm

Note #2 :

The RDA was not taken in 04 as the prior owner had already depreciated his full allowance under the pre-04 50%/5year rule. Bruce Ratner purchased the Nets in 2004, he got a new allowance based on his acquisition cost under the new 2004 100%/15yr rule. The allowance was taken on both 05 and 06 statements it is shown as an expense of about $40MM each year. When Ratner sold to Russian Mark Cuban, Prokhorov gets a new allowance based on HIS acquisition cost under the 100%/15 year rule.

Eventually, depreciation taken does count against your cost basis in capital gain calculations, but this is still an effing awesome tax break. Over the 15 years you get to defer income equal to your purchase costs out of your income tax bracket (35%)) and into the long term capital gains tax bracket (15%.) That is a 60% tax reduction through preferential tax treatment. Talk about a major boost to your total return! All the while, the owner is allowed to take constructive receipt of positive cash flow from the team or other income sources and SPEND that money. It doesn't work this way for joe sixpack. Depreciation is often considered an add back in child support calculations specifically because it is NOT an actual cash flow line item.

This is not the only corporate welfare giveaway in the tax code, and as a business owner, I get depreciation and other tax breaks which I certainly take advantage of. It's not against the rules but it IS NOT A CASH FLOW EXPENSE, it is an ASSET and ultimately increases the owners cash real flow. This is also the only tax break like this that is based on treating PEOPLE as property or LIVESTOCK that I am aware of. In the immortal words of Rasheed Wallace "Ball don't lie!"

F :censored: the owners.
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Re: Lockout 

Post#128 » by cellomac1212 » Thu Jul 7, 2011 5:41 pm

Damn Sleep... What the hell do you do for a living? You got knowledge on every situation involving numbers (advanced stats, equations, taxes, accounting practices, and so on). Either you got way too much time on your hands or you got a serious job...

I'm with you though, there is no way these owners are hurting for money. If they are losing money, it's more of a bruise to their ego than their bank account. But after watching how politics finds ways to keep rich people rich with tax breaks and every advantage possible, I find it hard to believe it's even possible for billionaires to ever lose money with a business as lucrative and prestigious as belonging to a club of 30 people that form a multi billion dollar corporation. I think its more about making more money. I believe the saying goes "Rich people are the cheapest people, how do you think they got rich?"
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Re: Lockout 

Post#129 » by Twinkie defense » Thu Jul 7, 2011 6:30 pm

Well if the League and its teams are not really suffering economically, and it's all accounting sleight of hand, then the players union are sure a bunch of numbskulls not to be pointing this out very specifically and shouting it from the rooftops.

But in fact the players union is saying the League did lose money, and have already offered to give back - what was it, $100 mil? I think they may be working for the owners... :roll:
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Re: Lockout 

Post#130 » by cellomac1212 » Thu Jul 7, 2011 6:56 pm

Twinkie defense wrote:Well if the League and its teams are not really suffering economically, and it's all accounting sleight of hand, then the players union are sure a bunch of numbskulls not to be pointing this out very specifically and shouting it from the rooftops.

But in fact the players union is saying the League did lose money, and have already offered to give back - what was it, $100 mil? I think they may be working for the owners... :roll:


The problem with this lockout is the fact that the players do not hold any strength in terms of financial situations. if the owners want more money the players have no ground to stand on weather the owners are making money or losing money. The owners will be filthy rich if they never have another NBA game, the players won't (of course a certain few will, but think about the majority here). Basically, the owners are using not making money as an excuse to change things. But even if the players can prove they are making money (which a lot of articles have suggested), the owners will still push to make more money. This situation isn't about being fair, it's about maximising the profit of the owners. They will push for more money regardless of what the players can prove. Fact is regardless, every owner knew when they bought the team it was a very risky buy as many teams report losing money, why now that they are living this reality (if true), should they be guaranteed a profit? Make sound business decisions, put out a quality product, and reap the benefits. anything different, deserves a loss just like any other business.

The longer the owners hold out, the more they will get out of this CBA. Once it kicks in the players aren't getting paid, they will become a lot more willing to negotiate.
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Re: Lockout 

Post#131 » by Twinkie defense » Thu Jul 7, 2011 7:38 pm

I don't think the owners have a monopoly on wanting to maximize their returns - of course that is what the players are trying to do as well.

And regarding the players' supposed lack of hand - don't you think their negotiating position would be helped if they were forcibly communicating that the League and its teams are in fact very profitable, and it's only because of this bogus accounting trick that they're pretending they're not? And so why aren't they doing this?

Seriously, their response to getting a bunch of audited financial statements and tax returns was to say, well last time you predicted that revenue would end up at X, and in fact it ended up at Y, and so therefore we can't trust anything you say? That's damn weak. They have billions at stake and they need to be hiring accountants to dissect those reports and prove them a lie to everyone, if that's what they are.

Also, if it was simply an on-paper roster depreciation allowance that all the teams were using to give a fake impression that they aren't all making money hand-over-fist (Minnesota, Sacramento, Toronto, New Orleans, etc. etc.), don't you think ESPN or something more than a New York Times blog - BLOG - would be reporting on this?

TBH, I couldn't care less how they ultimately resolve this. They all make way too much money for something that, at the end of the day, is silly and unimportant anyway. I'm not in it for the owners, my only interest is I just want them to play a reasonable schedule next season and see what the Warriors can do with it. But the players have benefited from a very profitable arrangement. So if so many teams are hurting it makes sense to me that the players would bear a significant burden in addressing those losses. And if the League's claims are BS, I want to know that. But my critical thinking is telling me that for some reason Sleepy has gone down the tax code rabbit hole, and there's no light down there.

On the other hand, if what the argument is really about is that the players want the profitable teams to bear the burden of keeping the unprofitable teams afloat, instead of floating those teams on the players' backs, then they should just say that. And I'm sure we could have many discussions on the relative merits of each approach, or some shared approach (it should be pointed out that there was some redistribution of wealth from the rich teams to the poor teams in the prior CBA). And the unavoidable conclusion of those conversations will probably be the realization that there are too many teams. But neither the players or the League wants to address that issue.
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Re: Lockout 

Post#132 » by Sleepy51 » Thu Jul 7, 2011 7:41 pm

It is highly likely that the players association was provided the league's financial statements without cover of a non-disclosure agreement.

The information that has been leaked has been published and analyzed by uninvolved third parties. There is no reasonable expectations that players association CAN disclose specific details about the owners financial documents. That information was provided to them in the course of private negotiations. The owners on the other hand can speak publicly all they want about their own financial documents.
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Re: Lockout 

Post#133 » by floppymoose » Thu Jul 7, 2011 7:59 pm

Twinkie defense wrote:Well if the League and its teams are not really suffering economically, and it's all accounting sleight of hand, then the players union are sure a bunch of numbskulls not to be pointing this out very specifically and shouting it from the rooftops.


It's a losing fight for the players. They don't hold the cards: the owners have the books and the players don't, so the owners have the upper hand in the numbers game. And the fans are always going to blame the players anyway, plus the fans don't really matter in this. Finally, the owners are only going to get pissed off and more entrenched if the players go BIG on calling out their lies. It's better to just let them quietly roast in their own juices until they start eating each other.
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Re: Lockout 

Post#134 » by Twinkie defense » Thu Jul 7, 2011 10:37 pm

I don't know why the players are supposedly so weak. They're so damn rich, they can take a year off, play in Europe, start their own League... people aren't going to watch the NBA if it's completely devoid of stars and rolling out D-League talent. If they are so weak it must be because the union doesn't know what the hell it is doing (though I don't buy that).

Even if they have League financial documents that they are not allowed to share, that has never prevented leaks and off-the-record conversations. It happens with grand juries, military, government, and it would happen in sport. If the financials really are BS they really ought to be making a better case, and start pitting the rich teams against the poor teams - divide and conquer.

But again, to everything I see the players agree that the League as a whole as well numerous specific teams are losing money - else why would they be offering to give back the moment negotiations begin? Why aren't they asking for even more money?

Unlike the NFL, which appears about ready to settle their disagreements with the players, sign a new CBA, and get back to work (courts permitting), I could see the NBA taking a long time to settle. When they finally do come back, I think fans will be there waiting for them. But one key variable is this: if the teams are genuinely financially challenged, they will have little incentive to get back to business under the old rules. But if they were making a lot of money under the old rules, you think there would be a big disincentive to derailing the season. So in lieu of full financial disclosure, I think - short of outright capitulation by the players - we can look at the length of the lockout as a proxy for how well or poorly the teams are doing financially.
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Re: Lockout 

Post#135 » by floppymoose » Thu Jul 7, 2011 11:33 pm

Twinkie defense wrote:I don't know why the players are supposedly so weak.

Who said they were weak?
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Re: Lockout 

Post#136 » by floppymoose » Thu Jul 7, 2011 11:34 pm

Twinkie defense wrote:if the teams are genuinely financially challenged, they will have little incentive to get back to business under the old rules. But if they were making a lot of money under the old rules, you think there would be a big disincentive to derailing the season.


I agree. I think if the players stand firm we will end up with a CBA pretty similar to the current one when it comes to the bottom line: what is the player's slice of the pie. But will the players stand firm? I have no idea.
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Re: Lockout 

Post#137 » by cellomac1212 » Fri Jul 8, 2011 12:16 am

About 80% of players cannot afford to take a year off the NBA. Those are the guys the owners have complete control over. Unless Lebron and Kobe are willing to share their fortunes to get the broker players through this, i don't know how the players will stand firm.

When you make $10 an hour you're broke right? So why when you make $30 an hour you're still broke? And why when you make $50 an hour, you're still broke? Get where I'm going? most people live knowing that their next check is guaranteed (even when it isn't). Though some of these players make a lot of money, just like anyone else would, they spend a lot of money.
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Re: Lockout 

Post#138 » by Twinkie defense » Fri Jul 8, 2011 1:12 am

I think the average NBA salary is about $5 mil... and there aren't enough $20 mil players to skew that number too much. Even the worst guys still made at least $2-3 mil last season. Basketball players are much better able to withstand some time off than their football counterparts.

If you made $2 mil last season and you refuse to get any sort of other work like playing in Turkey but can't afford to take 9 months off, I got no respect for ya playa.
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Re: Lockout 

Post#139 » by marthafokker » Fri Jul 8, 2011 2:17 am

In Deron Williams' case, I think he might have spent all his yearly salary. Why the hell would he risk being injured and have his contract voided? And to only earn $200k/month in Turkey?
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Re: Lockout 

Post#140 » by cellomac1212 » Fri Jul 8, 2011 2:49 am

Twinkie defense wrote:If you made $2 mil last season and you refuse to get any sort of other work like playing in Turkey but can't afford to take 9 months off, I got no respect for ya playa.


Sounds like you might not have respect for a lot of players... Haha.

if people like Jamarcus Russell are going bankrupt less than a year after he was paid 40 mil, imagine some of these guys who only got 2 mil. Also the league just drafted 60 guys who are yet to see a paycheck. Football is a lot worse in terms of broke players, but the NBA has its share too. Look at people like Antoine Walker. The lifestyle is expensive and some people live it to the fullest. The lack of that 5 million dollar pay check, will make a lot of peoples hands sweat... Well see though. I'm with the players here, hopefully they hold out and get at least what they have been getting, but I think the owners are more prepared to win this battle...

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