Previous law exempted teams from any tax implications for trades, as they were considered “like kind” exchanges. That provision was eliminated under the new law, and it appears teams will now have to pay capital gains taxes when trading players.
USA Tax Bill Reportedly Could Subject NBA, MLB Trades to Capital Gains Taxes - (
New Window )
It’s unclear at this point whether this has a real impact or not. The law is not specific enough, so it’s left to the IRS to make a determination. However, by the letter of the law it would apply.
In any case, if it is impactful, it’s highly unlikely Congress will pass any changes this year. So this could have a significant impact on trades, at least in the short term. And there may not be a sympathetic ear to this longer term either.