WNBA - Business? Hobby?

[SVCBeercats]

This is not facetious question. After 30 years of failing to earn a profit how does the WNBA avoid being classified as a hobby by the IRS? Is it a business entity unto itself or a division of the NBA? Do sports businesses have their own classification for tax purposes?

If your business claims a net loss for too many years, or fails to meet other requirements, the IRS may classify it as a hobby, which would prevent you from claiming a loss related to the business. If the IRS classifies your business as a hobby, you'll have to prove that you had a valid profit motive if you want to claim those deductions.

 

[TheFarmFan]

This is not facetious question. After 30 years of failing to earn a profit how does the WNBA avoid being classified as a hobby by the IRS? Is it a business entity unto itself or a division of the NBA? Do sports businesses have their own classification for tax purposes?

If your business claims a net loss for too many years, or fails to meet other requirements, the IRS may classify it as a hobby, which would prevent you from claiming a loss related to the business. If the IRS classifies your business as a hobby, you'll have to prove that you had a valid profit motive if you want to claim those deductions.

I'm reminded of the late Senator Moynihan's quote, "Everyone is entitled to his own opinion, but not his own facts."

-The League is barely 20 years old, not 30.
-A simple google search reveals that the league is half-owned by WNBA team owners, and half-owned by the 30 NBA team owners.
-Another simple google search would reveal that leagues can be organized as non-profits when all profits flow to team owners, which was the structure of the NFL until 2015 when it became too politically intolerable.
-Because profits flow to team owners, the League itself is not even the salient entity, the teams are. Apparently around half generate profit in any given year.
-Collectively, the league has lost about $12m per year, recently, according to Adam Silver. But as this article notes, it's not clear what he means by "the League," and it hasn't opened up its books to reveal if that means collectively revenue of all 12 franchises, etc. Is it strategic for the league to operate at a loss so the teams can operate at a profit, ala the old NFL structure? Who knows. That's a major point of contention for the upcoming CBA renegotiations.

I learned all of this in five minutes on Google. I feel like a few minutes of due diligence could have resolved this for you.

 

[McFly]

We're all familiar with the superiority of all things Stanford. Still, I believe that condescension is uncalled for. A few minutes of due diligence could eliminate most internet fora.

 

[TheFarmFan]

We're all familiar with the superiority of all things Stanford. Still, I believe that condescension is uncalled for. A few minutes of due diligence could eliminate most internet fora.

To the degree you detected condescension, it’s worth asking if it might have been in response to the original post’s own condescension. Given the absence of basic facts about the league, it sure seemed like a facetious question, rather than an earnest one. I’m not sure how else to read a post whose insinuation is that the WNBA should be considered a hobby?

 

[JoePgh]

In the specific case of the Sun, the team itself would almost certainly not have a profit and loss statement for either tax or accounting purposes. I'm pretty sure that the basketball team is not a separate legal entity. It's just one small (insignificant?) part of the whole Mohegan Sun enterprise, which is undoubtedly profitable overall. So this issue wouldn't arise.

I suspect that is true for most WNBA teams, including those which are owned by NBA teams.

Many (most?) large businesses operate divisions which are unprofitable, for any of a number of reasons, such as that it is a loss leader that brings customers to the door who hopefully buy the company's other products. For example, HP continues to sell personal computers for that reason, even though by themselves they are unprofitable.

 

[SVCBeercats]

Many (most?) large businesses operate divisions which are unprofitable, for any of a number of reasons, such as that it is a loss leader that brings customers to the door who hopefully buy the company's other products. For example, HP continues to sell personal computers for that reason, even though by themselves they are unprofitable.

Interesting since once I read an article which said the NBA among other reasons supports the WNBA in order to attract women to the NBA.

 

[the Q]

I'm reminded of the late Senator Moynihan's quote, "Everyone is entitled to his own opinion, but not his own facts."

-The League is barely 20 years old, not 30.
-A simple google search reveals that the league is half-owned by WNBA team owners, and half-owned by the 30 NBA team owners.
-Another simple google search would reveal that leagues can be organized as non-profits when all profits flow to team owners, which was the structure of the NFL until 2015 when it became too politically intolerable.
-Because profits flow to team owners, the League itself is not even the salient entity, the teams are. Apparently around half generate profit in any given year.
-Collectively, the league has lost about $12m per year, recently, according to Adam Silver. But as this article notes, it's not clear what he means by "the League," and it hasn't opened up its books to reveal if that means collectively revenue of all 12 franchises, etc. Is it strategic for the league to operate at a loss so the teams can operate at a profit, ala the old NFL structure? Who knows. That's a major point of contention for the upcoming CBA renegotiations.

I learned all of this in five minutes on Google. I feel like a few minutes of due diligence could have resolved this for you.

Does the nba subsidy count and it still lost $12m per year? How does that essentially charity money factor in?

 

[Orangutan]

What compels one to argue this for the 100th time on an idle Wednesday night?

 

[triaddukefan]

What compels one to argue this for the 100th time on an idle Wednesday night?

Its the off-season