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Tax bills for selling basketball team could be astronomical

For many people, estate planning comes down to one thing: making sure that as much of the assets are passed down to the heirs who are supposed to inherit them. In many cases, this means developing strategies to minimize the impact of estate taxes.

Depending on the size of someone's estate, this could be a substantial burden. One extreme example involves the disgraced owner of the NBA's Los Angeles Clippers, Donald Sterling. A deal was announced recently that would sell the team to Steve Ballmer, a former head of Microsoft. Sterling purchased the team in the early 1980s when it was still based in San Diego for $12.5 million; he moved it to the more lucrative Los Angeles market shortly thereafter.

Ballmer's bid for the Clippers is $2 billion. No NBA team has sold for as much as even $1 billion before now. That means that the capital gain on the investment would be more than $1.9 billion. Based on a 20 percent long-term capital gains tax cap, that amounts to nearly $400 million owed to in federal tax.

That still would leave an enormous fortune. Eventually, the Sterling family will be faced with paying estate taxes, which could add hundreds of millions of dollars to the overall tax bill as a result of this sale.

Most Texas families will not be faced with this kind of tax liability, but some may bump up against the federal estate tax exemption, which is just over $5 million per person for 2014. Seeking advice from experienced estate planning attorneys can help remove some of the mystery regarding these complex rules.

Source: MarketWatch, "Donald Sterling faces $662 million tax bill," Bill Bischoff, June 2, 2014

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