Taxes: Why Magic REALLY Sold His Share of the Lakers
This week, it was announced that Magic Johnson sold his 5% stake in the Lakers to billionaire biotech investor and long-time Lakers season ticket holder Patrick Soon-Shying, the 46th-richest individual in the country, according to Forbes magazine.
However, a source not authorized to speak publicly has said that Earvin “Magic” Johnson has also sold 105 of his Starbucks franchises back to the Starbucks Company.
Magic’s long-time agent Lon Rosen said: “it was a very smart business decision on Earvin’s part [to sell].” Keep reading to understand why it was.
First, there is a ton of anticipation for the Lacer’s upcoming season. They are on their way to a potential three-peat. The team is still a contender; Magic is selling on the up trend. Better now than to wait potentially a few years down the line when Kobe isn’t the best player in the game and other teams are winning championships.
However, the most important reason why it was a good business decision is because the capital gains tax that will likely rise from 15 to 20% due to the expiration of the Bush Tax Cut’s at the end of the year.
Any profits made on investments held over the length of one year are subject to the capital gains tax. Magic is avoiding the likely increase by selling his shares of the Lakers and Starbucks.
According to the LA Times, Magic will net about $100 million between the two transactions. This amounts to a significant potential savings for Magic if the Bush Tax Cut’s do indeed expire.
Many investors are selling business, stocks, mutual funds, any investment held over 1 year to avoid paying the additional 5%. Also, the rate may climb over 20% in the years to come.
In 2013, and 3.8% Medicare tax is to be added to investment income. “Investment Income” has not been defined as of yet, but it should likely include capital gains. Meaning that capital gains tax could essentially go to 23.8% from 15% currently. That’s over a 50% increase in the tax.
Magic seems to have some great accountants as well as his business savvy. He sure did pick the right time to sell.
