Posts
The Tax Arbitrage Scheme
How NFL Owners Use Team Losses to Shelter Real Estate Billions
THE LAND GRAB — Post 5 | February 8, 2026
Post 1: The $335 Million Question — Brady's Raiders "discount"
Post 2: The Forbes Gap — Valuations exclude billions in real estate
Post 3: The Public Subsidy Shell Game — $12B welfare = private wealth
Post 4: The Green Bay Test — Non-profit proves owners lie
Post 5: The Tax Arbitrage Scheme ← YOU ARE HERE — Shelter gains through team "losses"
Post 6: The Stadium Authority Scam — Public-private = privatize profits
Post 7: The Global Pattern — NFL to EPL to Saudi
How Sports Team Depreciation Works
When you buy an NFL team, the IRS allows you to treat it as an asset that depreciates over time—like a factory or piece of equipment that wears out and loses value.
This might seem absurd. NFL franchises don't lose value. They appreciate massively. Jerry Jones bought the Cowboys for $140 million in 1989. They're now worth over $10 billion. That's appreciation, not depreciation.
But the IRS doesn't care about actual value. They care about tax treatment. And under longstanding tax law, sports franchises are treated as intangible assets that can be depreciated.
The mechanism:
When you buy a team, the purchase price is allocated across different asset categories:
- Tangible assets: Stadium (if owned), equipment, facilities—maybe 10-20% of purchase price
- Intangible assets: Player contracts, franchise rights, goodwill, brand value—80-90% of purchase price
The IRS allows intangible assets to be depreciated over 15 years (per Revenue Ruling 2004-58). This means if you buy a team for $2 billion and allocate $1.8 billion to intangibles, you can deduct roughly $120 million per year for 15 years.
The result: paper losses even when the team is profitable.
Let's say the Panthers generate $50 million in actual profit in a given year. But Tepper also takes $150 million in depreciation. On his tax return, the team shows a $100 million loss. That loss can offset other income—hedge fund gains, real estate profits, investment returns.
Tepper makes $50 million in real profit from the Panthers plus $200 million in gains from his hedge fund and real estate. Total real income: $250 million. But on his taxes, he reports $100 million in team losses. Net taxable income: $150 million. Tax avoided on $100 million: roughly $40 million (at top marginal rates).
Every year. For 15 years.
WHEN YOU BUY AN NFL TEAM:
• Purchase price allocated to tangible (10-20%) and intangible (80-90%) assets
• Intangible assets: player contracts, franchise rights, goodwill, brand value
• IRS allows 15-year depreciation on intangibles (Revenue Ruling 2004-58)
EXAMPLE: $2 BILLION TEAM PURCHASE
• Tangible assets: $400M (stadium, equipment, facilities)
• Intangible assets: $1.6B (player contracts, franchise rights, goodwill)
• Annual depreciation: $1.6B ÷ 15 years = ~$107M/year
THE PAPER LOSS:
• Team generates $50M actual profit (operations)
• Owner takes $107M depreciation deduction
• Tax return shows: $57M loss (even though team is profitable)
THE ARBITRAGE:
• Team “loss”: $57M (paper)
• Hedge fund gains: $100M (real)
• Real estate gains: $100M (real)
• Total real income: $207M ($50M team profit + $100M + $100M gains)
• Taxable income after depreciation: $150M ($207M - $57M loss)
• Tax avoided: ~$23M (on $57M sheltered at 40% rate)
This repeats every year for 15 years. Total tax avoided: $345M+ over life
of ownership (on one $2B team purchase).
Case Study: David Tepper and the Panthers
David Tepper is worth an estimated $20+ billion. He made his fortune running Appaloosa Management, a hedge fund specializing in distressed debt. In 2018, he bought the Carolina Panthers for $2.275 billion.
The depreciation play:
- Purchase price: $2.275 billion
- Allocate roughly 80% to intangibles: ~$1.82 billion
- 15-year depreciation: ~$121 million per year
The Panthers' actual profitability:
We don't know for certain (Tepper doesn't disclose financials), but we can estimate based on the Packers' model. The Packers profit $68.6 million in a smaller market. Charlotte metro population is ~2.8 million (vs. Green Bay ~320,000). The Panthers should be significantly more profitable than the Packers.
Conservative estimate: Panthers likely profit $80-100 million per year on football operations.
But on Tepper's tax returns:
- Panthers profit: $80-100 million (estimate)
- Depreciation: $121 million
- Net tax treatment: $21-41 million loss
So even though Tepper owns a profitable team, it generates tax losses for him personally.
Where this matters:
Tepper's hedge fund generates massive gains. He invests in distressed debt, buys undervalued assets, profits when they recover. In a good year, Appaloosa might make $500 million in gains. Tepper's personal cut: hundreds of millions.
He also owns real estate, has equity investments, and generates income from other sources. All of this is taxable.
Except: the Panthers losses offset those gains. Instead of paying taxes on $500 million in hedge fund income, Tepper pays taxes on $479 million (after the $21 million Panthers "loss"). Tax saved: roughly $8 million per year.
Over 15 years, Tepper will shelter roughly $1.8 billion in income from taxation using Panthers depreciation. Tax saved: over $700 million (at top marginal rates).
And at the end of 15 years? Tepper can sell the Panthers. They'll likely be worth $5+ billion by then (franchise values have doubled roughly every 10 years). He'll pay capital gains tax on the sale (20% federal rate), which is lower than ordinary income tax rates (37% top marginal). And he'll have sheltered $700+ million in taxes during ownership.
PURCHASE (2018): $2.275 BILLION
• Allocated to intangibles: ~$1.82B
• Annual depreciation: ~$121M/year for 15 years
PANTHERS ACTUAL PROFITABILITY:
• Charlotte metro: 2.8M (vs. Green Bay 320K)
• Packers profit: $68.6M in smaller market
• Panthers estimate: $80-100M/year profit (conservative)
TAX TREATMENT:
• Panthers profit: $80-100M (real)
• Depreciation deduction: $121M
• Net on tax return: $21-41M LOSS (despite actual profit)
THE ARBITRAGE:
• Hedge fund income (Appaloosa): $500M/year (example)
• Panthers “loss”: $21-41M
• Taxable income: $459-479M (instead of $500M)
• Tax saved: $8-16M/year
• Over 15 years: $120-240M in tax savings
• Plus: shelters real estate gains, other investment income
AT SALE (projected ~2033):
• Purchased: $2.275B (2018)
• Estimated value: $5-6B (franchise values double every 10 years)
• Gain: $3-4B
• Capital gains tax (20%): $600-800M
• But saved $120-240M+ in income taxes during ownership
• Net tax efficiency: shelter ordinary income (37% rate) via depreciation,
pay capital gains (20% rate) on appreciation
Total wealth created: $3-4B. Total taxes paid: ~$600-800M. Effective rate: ~17%.
Compare to: middle-class worker pays 22-24% on salary.
The Real Estate Offset: Where the Real Money Hides
Team depreciation alone is a tax benefit. But the real arbitrage happens when owners combine team losses with real estate gains.
Here's how it works:
Jerry Jones example:
Jones owns the Cowboys (Forbes: $10.1 billion). He also owns The Star in Frisco and controls AT&T Stadium revenue. Let's conservatively estimate his annual income:
- Cowboys football operations: $150 million profit (larger market than Packers, likely 2x+ their $68.6M)
- The Star (real estate appreciation + rental income): $50 million per year
- AT&T Stadium (naming rights, non-NFL events, parking): $75 million per year
- Total real income: $275 million per year
Now, Jones bought the Cowboys in 1989 for $140 million. He's long past the depreciation window from that purchase. But when the Cowboys built The Star (2016), that was a $1+ billion investment. Jones can depreciate The Star facilities over time.
And when AT&T Stadium was built (2009, $1.15 billion), Jones structured ownership to maximize depreciation on his share of the investment.
Between The Star, AT&T Stadium improvements, and ongoing facility investments, Jones likely has significant annual depreciation deductions—conservatively, $50-100 million per year.
Tax treatment:
- Real income: $275 million
- Depreciation (facilities, investments): $75 million
- Taxable income: $200 million
- Tax saved on $75 million: ~$30 million per year
This is conservative. Jones has other investments, oil and gas holdings, and additional real estate. The depreciation from Cowboys-related assets shelters income from all sources.
The pattern:
Every owner who builds real estate (The Star, SoFi Stadium, Jacksonville developments, Buffalo stadium district) gets to depreciate those investments. The depreciation creates paper losses that offset real gains from:
- Appreciating real estate (land values go up, but no tax until sale)
- Rental income from mixed-use developments
- Other business income (hedge funds, private equity, investments)
The team and stadium investments are loss generators for tax purposes. The real estate and other businesses are wealth generators in reality. The losses shelter the gains. The billionaire pays minimal taxes.
JERRY JONES EXAMPLE (Conservative Estimates):
ANNUAL REAL INCOME:
• Cowboys football operations: $150M profit
• The Star (real estate appreciation + rent): $50M/year
• AT&T Stadium (naming rights, events, parking): $75M/year
• Total real income: $275M/year
DEPRECIATION DEDUCTIONS:
• The Star facilities (built 2016, $1B+ investment): depreciate over 15-39 years
• AT&T Stadium improvements: ongoing depreciation
• Other facility investments
• Total annual depreciation: $50-100M/year (conservative)
TAX TREATMENT:
• Real income: $275M
• Depreciation: $75M (midpoint estimate)
• Taxable income: $200M
• Tax owed: $74M (at 37% top rate)
• Tax if no depreciation: $102M
• Tax saved: $28M/year via depreciation
WHAT’S BEING SHELTERED:
• Real estate appreciation (The Star land value up 300%+): not taxed until sale
• Rental income from mixed-use development: sheltered by depreciation
• Other business income: sheltered by team/facility losses
THE ARBITRAGE:
Depreciate facilities (create paper losses) → Shelter real estate gains
(actual wealth) → Pay minimal taxes on billions in appreciation → Sell
at capital gains rates (20%) instead of income rates (37%)
This is legal. This is standard. This is how every NFL owner operates.
Case Study: Josh Harris and the Commanders
Josh Harris bought the Washington Commanders in 2023 for $6.05 billion—the highest price ever paid for a sports franchise.
The depreciation vehicle:
- Purchase price: $6.05 billion
- Allocate 80% to intangibles: ~$4.84 billion
- 15-year depreciation: $323 million per year
This is the largest annual depreciation deduction in sports history.
Who is Josh Harris?
Harris co-founded Apollo Global Management, one of the world's largest private equity firms (over $600 billion in assets under management). He's worth an estimated $8+ billion personally. He owns:
- The Commanders (NFL)
- The Philadelphia 76ers (NBA)
- The New Jersey Devils (NHL)
- Significant real estate holdings through Apollo and personal investments
Harris generates massive income from Apollo (management fees, carried interest on fund returns), real estate investments, and other business ventures. Conservatively: hundreds of millions per year in taxable income.
The Commanders depreciation ($323 million per year) shelters a huge portion of that income.
Example scenario:
- Apollo income: $400 million per year
- Real estate gains: $100 million per year
- Other investments: $50 million per year
- Total income: $550 million per year
Without the Commanders:
- Taxable income: $550 million
- Tax owed (37% top rate): $204 million
With the Commanders depreciation:
- Commanders "loss": $323 million (depreciation exceeds any team profit)
- Net taxable income: $227 million ($550M income - $323M loss)
- Tax owed: $84 million
- Tax saved: $120 million per year
Over 15 years, Harris will shelter roughly $4.84 billion in income from taxation using Commanders depreciation. Tax saved: approximately $1.8 billion (at top marginal rates).
And this doesn't even account for the Commanders' actual profitability (likely $100M+ per year in a DC market), real estate plays Harris will develop around a new stadium (he's already exploring DC, Maryland, and Virginia sites), or the appreciation in franchise value (could be worth $10+ billion by the time he sells).
Harris bought a $6 billion tax shelter that will also generate billions in real wealth. And he'll pay a fraction of what he'd owe if that wealth were ordinary income.
PURCHASE (2023): $6.05 BILLION
• Largest sports franchise sale in history
• Allocated to intangibles: ~$4.84B
• Annual depreciation: $323M/year for 15 years
• Largest annual sports depreciation deduction ever
WHO IS JOSH HARRIS:
• Co-founder, Apollo Global Management ($600B+ AUM)
• Net worth: $8B+
• Also owns: 76ers (NBA), Devils (NHL)
• Income sources: Apollo fees, carried interest, real estate, investments
• Annual income estimate: $400-600M+ (conservative)
THE TAX ARBITRAGE (Example Scenario):
• Apollo income: $400M/year
• Real estate gains: $100M/year
• Other investments: $50M/year
• Total real income: $550M/year
WITHOUT COMMANDERS:
• Taxable income: $550M
• Tax owed (37%): $204M
WITH COMMANDERS DEPRECIATION:
• Commanders “loss”: $323M (depreciation)
• Net taxable income: $227M ($550M - $323M)
• Tax owed: $84M
• Tax saved: $120M/year
OVER 15 YEARS:
• Total income sheltered: $4.84B
• Total tax saved: ~$1.8B (at 37% rate)
PLUS:
• Commanders will generate $100M+ profit/year (real income, not taxed heavily due to depreciation)
• Real estate plays around future stadium (DC/MD/VA sites)
• Franchise appreciation: $6B → likely $10B+ by sale
• Exit via capital gains (20%) instead of income tax (37%)
Harris bought a $6B asset that will:
1. Shelter $1.8B in taxes during ownership
1. Generate $1.5B+ in profits over 15 years
1. Appreciate to $10B+ (gain taxed at 20% not 37%)
1. Enable real estate wealth outside team financials
This is the ultimate tax arbitrage vehicle.
Why the Packers Can't Do This
The Green Bay Packers are a non-profit. They don't have a private owner who can use team depreciation to shelter personal income.
When the Packers invest in Lambeau Field improvements or facilities, those investments depreciate over time. But the depreciation doesn't benefit any individual. It reduces the team's taxable income, which is minimal anyway (non-profits pay limited taxes).
The Packers can't:
- Use team losses to shelter real estate gains (they don't have real estate empires)
- Offset hedge fund income with depreciation (no private owner with other income streams)
- Structure ownership to maximize personal tax benefits (ownership is symbolic, no personal gain)
The Packers pay taxes on their profits (if any, after reinvestment) at standard non-profit rates. Their $68.6 million in profit (2023) doesn't generate massive tax deductions for anyone. It just gets reinvested in the team or donated to charity.
This is why the Packers' $68.6 million profit is the real number. There's no depreciation arbitrage. There's no sheltering. What they report is what they make.
Private owners report a fraction of what they make because depreciation hides the real income.
The Scale: Billions in Tax Avoidance Across the League
Let's conservatively estimate the tax avoidance across all 32 NFL teams:
Average team sale price (last 10 years): ~$3 billion
- Allocated to intangibles: ~$2.4 billion
- Annual depreciation: ~$160 million per owner
- Tax saved per owner (at 37% rate): ~$59 million per year
32 teams × $59 million = $1.9 billion in tax savings per year across all owners (assuming all are in active depreciation windows)
In reality, not all 32 teams are in active depreciation windows (some owners bought decades ago and have exhausted depreciation). But with recent sales and new ownership entering the league (Harris, Tepper, Pegulas, etc.), a significant portion of teams are generating massive depreciation deductions.
Conservative estimate: 20 teams are actively using depreciation to shelter income = $1.2 billion in tax avoidance per year league-wide.
Over 15 years: $18 billion in taxes avoided by NFL owners through depreciation arbitrage alone.
And this doesn't include:
- Real estate depreciation (stadiums, mixed-use developments, facilities)
- Other tax strategies (carried interest, qualified business income deductions, estate planning)
- The capital gains benefit when teams are sold (20% rate vs. 37% income rate)
The total tax avoidance is likely $30+ billion over the next 15 years across all NFL owners.
CONSERVATIVE ESTIMATE (Per Team, Recent Sales):
• Average purchase price (last 10 years): ~$3B
• Allocated to intangibles: ~$2.4B
• Annual depreciation: ~$160M/year
• Tax saved per owner (37% rate): ~$59M/year
ACROSS 32 TEAMS:
• If all 32 teams in depreciation window: $1.9B/year tax savings
• Reality: ~20 teams actively depreciating (recent sales, new owners)
• Annual tax avoidance (league-wide): ~$1.2B/year
• Over 15 years: $18B in taxes avoided
THIS DOESN’T INCLUDE:
• Real estate depreciation (stadiums, developments, facilities)
• Other tax strategies (carried interest, QBI deductions, estate planning)
• Capital gains benefit on sale (20% vs 37% income rate)
TOTAL TAX AVOIDANCE (All Strategies, 15 Years):
• Estimated: $30+ billion across all NFL owners
TO PUT THIS IN PERSPECTIVE:
• $30B could fund: 300,000 teachers for 10 years
• Or: rebuild infrastructure in 100 cities
• Or: healthcare for millions
Instead: billionaire NFL owners use it to shelter wealth while claiming
teams barely break even.
Is This Legal? Yes. Is This Right? No.
Everything described in this post is legal. The IRS explicitly allows sports team depreciation under Revenue Ruling 2004-58. Courts have upheld it. Accountants structure deals around it. It's standard practice.
But legal doesn't mean ethical.
The problems:
1. Teams don't actually depreciate
NFL franchises appreciate in value, consistently and dramatically. Jerry Jones bought the Cowboys for $140 million, they're now worth $10+ billion. That's 7,000%+ appreciation. The idea that they're depreciating assets is fiction.
The IRS allows depreciation on the theory that player contracts and intangible assets lose value over time. But franchise values have increased every year for decades. The depreciation is a tax fiction that doesn't match economic reality.
2. Owners shelter real income while claiming poverty
Owners use depreciation to report losses while making hundreds of millions in real profit. Then they claim they can't afford higher player compensation in CBA negotiations. They claim they need public subsidies to survive.
The Packers prove this is a lie. They report $68.6 million in real profit with no depreciation games. Private owners make far more—they just hide it.
3. Billionaires pay lower rates than workers
A teacher making $60,000 per year pays a 22% effective tax rate. A billionaire NFL owner making $500 million per year (real income) might pay a 15-20% effective rate after depreciation, real estate sheltering, and capital gains treatment on sale.
Warren Buffett famously said he pays a lower tax rate than his secretary. NFL owners are the same: they pay less than their stadium janitors.
4. Public subsidies enable private tax avoidance
When cities give $850 million (Buffalo) or $1.26 billion (Nashville) to build stadiums, they're funding assets that owners then depreciate to avoid taxes. The public pays twice: once through subsidies, again through lost tax revenue.
If owners paid full taxes on their real income, federal and state governments would collect billions more. That money could fund the schools, infrastructure, and services that stadium subsidies supposedly provide (but don't).
The Capital Gains Endgame
The final piece of the tax arbitrage: when owners sell.
After 15 years of depreciating a team and sheltering billions in income, owners sell at massive appreciation. And that gain is taxed as capital gains (20% federal rate), not ordinary income (37% top rate).
Example: David Tepper (Panthers)
- Bought: $2.275 billion (2018)
- Depreciated: $1.82 billion over 15 years
- Tax sheltered: ~$700 million (at 37% rate on depreciation)
- Projected sale (2033): $5-6 billion (franchise values double every 10 years)
- Gain: $3-4 billion
- Tax on gain: $600-800 million (20% capital gains rate)
Net tax outcome:
- Saved $700 million in income taxes during ownership (via depreciation)
- Pays $700 million in capital gains at sale
- Net effect: converts high-rate income (37%) to low-rate capital gains (20%) via depreciation arbitrage
Tepper effectively pays 20% on $3-4 billion in wealth creation instead of 37% on the income he sheltered during ownership. The arbitrage saved him hundreds of millions.
And this assumes he doesn't use other strategies (Opportunity Zones, 1031 exchanges, charitable trusts) to defer or eliminate the capital gains tax entirely.
DURING OWNERSHIP (15 years):
• Depreciate team: $1.82B (Tepper example)
• Shelter income: $1.82B (ordinary income that would be taxed at 37%)
• Tax saved: ~$700M
AT SALE:
• Purchase price: $2.275B (2018)
• Sale price: $5-6B (estimated 2033)
• Gain: $3-4B
• Tax on gain: $600-800M (20% capital gains rate)
NET TAX OUTCOME:
• Without depreciation: would have paid $700M on sheltered income (37% rate)
• With depreciation: paid $0 during ownership, pay $700M at sale (20% rate)
• Effective conversion: 37% ordinary income → 20% capital gains
• Tax arbitrage: shelter high-rate income via depreciation, pay low-rate
gains on exit
PLUS OTHER STRATEGIES:
• Opportunity Zones (defer capital gains if reinvested)
• 1031 exchanges (defer if buying another team/asset)
• Charitable trusts (eliminate gains via donation)
• Estate planning (step-up basis if held until death)
Many owners will use these strategies to pay even LESS than 20% on exit.
Some will pay nothing.
What Needs to Change
The tax arbitrage scheme is legal, but it shouldn't be. Here's what reform would look like:
1. Eliminate or limit sports franchise depreciation
Sports franchises appreciate, not depreciate. The IRS should stop treating them as depreciating assets. If that's politically impossible, at least limit depreciation to actual losses (not paper losses on appreciating assets).
2. Require recapture on sale
If owners depreciate $2 billion during ownership and then sell for a $4 billion gain, the IRS should "recapture" the depreciation—treat it as ordinary income instead of allowing capital gains treatment. This would eliminate the arbitrage.
3. Transparency in ownership structures
Require NFL owners to disclose how they structure ownership entities, what income they shelter via depreciation, and how much tax they actually pay. Sunlight is the best disinfectant.
4. No public subsidies for profitable enterprises
If owners are profitable enough to shelter hundreds of millions in taxes, they don't need public subsidies for stadiums. Cities should refuse subsidy requests unless owners open their books and prove actual financial need (they can't).
5. Minimum tax on billionaire income
Implement a minimum tax on ultra-high-net-worth individuals (Biden proposed this, but it hasn't passed). Require billionaires to pay at least 20-25% on total economic income, including depreciation-sheltered gains. This would prevent the arbitrage.
None of this will happen without political will. But the Packers prove it's possible to run a profitable team without tax games. Private owners prove the games are just wealth extraction.
The Next Layer: How Public Entities Enable This
We've now documented how owners extract wealth and shelter it from taxes:
- Post 1: Minority stakes include flip taxes and real estate exposure
- Post 2: Forbes Gap—$20+ billion in real estate hidden from valuations
- Post 3: Public subsidies ($12B+) funded the real estate infrastructure
- Post 4: Packers prove football is profitable without extraction ($68.6M)
- Post 5: Tax arbitrage shelters billions via depreciation (legal but unethical)
But there's one more mechanism we haven't fully explored: stadium authorities.
These are public entities created to issue bonds, own stadiums, and manage development. They're supposed to protect taxpayer interests. But in practice, they're controlled by owners and used to privatize profits while socializing costs.
That's Post 6: The Stadium Authority Scam. We'll show how "public-private partnerships" are designed to let owners control public assets, extract revenue, and avoid accountability—all while taxpayers service the debt.
HOW WE BUILT THIS POST:
Randy identified tax arbitrage as the mechanism owners use to shelter extracted wealth. Claude researched IRS depreciation rules (Revenue Ruling 2004-58), sports franchise tax treatment, documented team sales (Tepper, Harris), and estimated tax savings based on standard depreciation schedules and top marginal rates. All depreciation math is based on IRS-allowed 15-year schedules for intangible assets. Estimates of owner income are conservative and labeled as such (we don’t have private tax returns).
SOURCES:
IRS Revenue Ruling 2004-58 (sports franchise depreciation), documented team sales prices (Tepper $2.275B, Harris $6.05B), marginal tax rate schedules (37% top federal rate, 20% capital gains), Packers 2023 financials (comparison for actual profitability), academic analysis of sports team tax treatment (Tax Policy Center, Stanford Law Review).
WHAT WE’RE DOCUMENTING:
This is Post 5 of 7. We’re showing how NFL owners use legal tax strategies (depreciation, capital gains treatment) to shelter billions in wealth while claiming teams barely profit. The Packers (Post 4) prove teams are profitable. This post shows how private owners hide that profitability via tax arbitrage. Next: how stadium authorities enable the extraction.
TRANSPARENCY COMMITMENT:
All tax calculations use publicly-disclosed rates and IRS rules. Owner income estimates are conservative and labeled as estimates (private tax returns aren’t public). The $18-30B league-wide tax avoidance is calculated based on average team sales, standard depreciation schedules, and current ownership turnover. We distinguish between what’s legal (everything here) and what’s ethical (open question).
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