The Los Angeles Lakers are changing hands again. Less than a year after Guggenheim Partners CEO Mark Walter acquired control of the team in a transaction valuing the Lakers at $10 billion, a group led by venture capitalist Josh Kushner and former Disney CEO Bob Iger reportedly has agreed to acquire the franchise at a $12.5 billion valuation.
Ramona Shelburne at ESPN broke the story, with additional reporting by Dave McMenamin:
“Josh and Bob obviously are very successful, but it’s a big equity check,” one member of a Western Conference team’s ownership group told ESPN. “Just curious how the deal is structured.”
Well, game on. Some numbers and informed speculation—as well as why the most interesting version of this deal isn’t likely to occur—below the fold.
First, a bit of messy context: Jerry Buss famously acquired the Lakers for $67.5 million in 1979, and the franchise remained majority-owned by the Buss family through October 30, 2025, when Walter, with venture capitalist Todd Boehly, acquired 58% of the franchise from the Buss family and two minority shareholders. Walter and Boehly previously had acquired a 27% stake from oil magnate and sports investor Philip Anschutz in 2021, and their 2025 acquisition brought their combined ownership to 85%. The Buss family owns the remaining 15% of the franchise through trusts established by Jerry Buss—right at the league’s minimum for Jeannie Buss to remain in her role as Lakers governor.
Walter and Boehly’s 2021 acquisition was at a reported valuation of $5.5 billion, which implies a $1.485 billion purchase price for their 27% stake. Their 2025 acquisition valued the franchise at $10 billion, which implies a $5.8 billion purchase price for the additional 58% interest. These numbers—take them with a grain of salt—would give Walter and Boehly $7.285 billion of tax basis in an 85% slice of the Lakers worth $10.625 billion in the proposed sale to Kushner and Iger. At a first cut, that’s $3.34 billion of total taxable gain, and I’ll generally hew to these assumptions.
Because all of these acquisitions are private, the ownership numbers aren’t certain, and there’s potential variance along three meaningful axes. First, the split between Walter and Boehly isn’t clear, with some reports indicating a 7% stake for Boehly from the 2021 sale. Second, it’s unclear whether or to what extent two minority shareholders—Patrick Soon-Shiong (4.5%) and Ed Roski (2.5%)—divested their interests in 2025; tag-along or drag-along rights may have applied. With Boehly and these minority owners, Walter’s direct ownership might be as low as 71%. If Kushner and Iger are buying only from Walter (subject to tags and drags), then Walter’s direct ownership may represent the upper bound on their acquisition.
Finally, reporting establishes that Kushner and Iger will acquire control of the franchise, but it doesn’t (yet) establish the precise percentage that they’ll purchase or from whom. The LA Times reports that Soon-Shiong will remain a minority shareholder post-closing, and multiple sources indicate that the Buss family will retain a 15% interest in the franchise. The important take-away is that Kushner and Iger may acquire as much as 85% of the franchise—or 80.5% with Soon-Shiong’s ownership. But Kushner and Iger’s actual acquisition may range from minimal effective control to 85%, and details may emerge as (or if) the deal moves through league approval and closing.
Capital Gain and the Holding Period Cliff
To some extent, this preamble distracts from the dollars-and-cents question: how much tax would be due on Walter and Boehly’s $3.34 billion of potential gain? It may be less than has been reported elsewhere. Let’s assume the property to be transferred is stock in The Los Angeles Lakers, Inc.—Buss’s historic vehicle that acquired the Lakers in 1979 or a successor. Walter and Boehly presumably hold their Lakers stock for investment (and perhaps directly, under league rules), which would make their gain capital and subject to § 1411’s 3.8% net investment income tax.
The wrinkle involves Walter and Boehly’s two blocks of Lakers stock: gain on the 2021 acquisition would be long-term, since Walter and Boehly have held the stock for more than one year. At the maximum net capital gain rate of 20%, with the NIIT, and setting aside any other capital loss, the aggregate tax due would be just under $450 million on $1.89 billion of gain. The NIIT may not apply to all of this gain (see below regarding S corporation status), but the ballpark is reasonable. For their 2025 block, the holding period is short-term if closing occurs before October 31, 2026, and long-term if closing happens on Halloween or later. The stakes are substantial. With a 37% maximum rate on short-term capital gain and the NIIT, the pre-Halloween tax liability would be about $592 million on $1.45 billion of gain. If the capital gain is long-term, the federal tax due would drop to a little more than $345 million—a savings of about $247 million. That’s a strong incentive to push closing past the 2025 closing’s anniversary.
In addition, California income taxes may apply at a top rate of 13.3%—another potential $444 million tax bill. But Walter is based out of Chicago, and Boehly out of Miami. For a California nonresident, gain from investment stock is not California-source income (with limited exceptions), and Walter and Boehly’s geographic ties—and their ability to obtain good tax advice—imply that California’s state income tax rates may not apply to this gain. Illinois has a 4.95% top individual income tax rate and Florida has no income tax, though it would be somewhat speculative to apply these rates to either Walter or Boehly without more information. The point is that state tax may add some drag to the sale, but probably not at California’s 13.3% rate.
Could There Be an Asset Basis Step-Up?
The foregoing analysis assumes a vanilla stock sale. Public filings, however, imply that The Los Angeles Lakers, Inc. may have made a subchapter S election. A 2017 Los Angeles probate petition identifies Jeanie Buss as co-trustee of the Jerry H. Buss 2006 Children’s Electing Small Business Trust and lists two other trusts with a similar designation. Under § 1361, ESBTs are special vehicles that are permitted S corporation shareholders. Similarly, a 2021 court filing identifies potential ESBTs as interested parties, along with other known Lakers owners. Although there’s no confirmation that an S election existed or survived the 2021 and 2025 transactions involving Walter and Boehly, there’s also nothing that indicates such an election’s termination. More broadly, an S corporation election probably made tax sense during Jerry Buss’s ownership and reasonably may have continued after the franchise passed to Buss’s children and was sold to others.
If The Los Angeles Lakers, Inc. is an S corporation, then the door opens to an election under § 338(h)(10) or § 336(e) and a potential asset-basis step-up with limited incremental tax cost. A § 338(h)(10) election generally is available on a qualified stock purchase: a taxable sale of 80% of an S corporation’s stock, by vote and value, to a corporate buyer within a twelve-month period. The regulations under § 336(e) define a qualified stock disposition similarly to § 338(h)(10) but without the requirement of a single corporate purchaser—or any need for a purchase at all. Although § 336(e) may fit the reported acquisition structure better than § 338(h)(10), the § 338(h)(10) regime tends to be more familiar and controls where the two elections overlap.
For the 2021 and 2025 Walter and Boehly purchases, neither the QSP nor QSD threshold was met in either year. The two purchases may have exceeded the 80% threshold in the aggregate but could not have been combined under the twelve-month limitation for both elections. The proposed 2026 sale, however, may exceed 80%—perhaps by a hair, if Soon-Shiong remains a minority shareholder after closing. Of course, the devil’s in the (nonpublic) details: how much stock is being sold and by whom, and whether any differential control rights cause an 80% purchase by number of shares to fail the voting threshold. But a QSP or QSD is possible, and that opens the door to deemed asset sale treatment—and a step-up in basis—under the applicable deemed-asset-sale regime.
If a § 338(h)(10) or § 336(e) election were available and made, The Los Angeles Lakers, Inc. would be treated as selling all of its assets in a taxable transaction to a new corporation for tax purposes, then liquidating to its former shareholders. This tax fiction would impose potential gain or loss in two places: once on the deemed asset sale, and again on the deemed liquidation. Under the S corporation rules, however, any gain on the asset sale would increase the former shareholders’ stock basis and reduce gain—or increase loss—on the deemed liquidation.
Why might this matter? As much as 80% of the value of sports franchises is intangibles, including goodwill and going concern value. For a $12.5 billion valuation, the Lakers’ assets might include $10 billion of intangibles that, under § 197, are amortizable over fifteen years on the straight-line method. The sale plausibly may avoid the anti-churning rules, if it’s also a QSP or QSD. Stepped up to fair market value, those intangibles yield $667 million of annual tax deductions. If the transaction is a QSP, The Los Angeles Lakers, Inc. almost certainly drops its S corporation status, and, at a 21% corporate rate, the intangibles’ amortization would yield $140 million of annual tax savings over 15 years on an unleveraged investment of $12.5 billion—about a 1.1% fixed return internally, not accounting for acquisition debt and on top of whatever return is generated by the Lakers’ real assets. The nominal value of this tax asset would be more than $2 billion, and its present value could exceed $1 billion—all generated by the § 338(h)(10) election.
If the transaction is a QSD, the tax result might be even better. The Los Angeles Lakers, Inc. could continue as a new S corporation, if Kushner and Iger held their stock directly or through qualified trusts and consented to a fresh S corporation election. In this case, the tax savings might be $272 million, with the NIIT and assuming that the franchise produces no § 199A pass-through deduction as an SSTB in the field of athletics. The deductions that generate these savings would be passed through to shareholders and would reduce income taxable at ordinary rates, subject to limitations such as the at-risk, passive activity loss, and excess business loss rules. Based on the unleveraged enterprise value, this higher tax savings could yield the equivalent of a roughly 2.2% fixed return over the fifteen-year amortization period. The nominal value of this tax asset would be about $4 billion, with a present value in excess of $2 billion. Again, the source of this benefit stream is the § 336(e) election, and the increased benefit comes with rigid—and perhaps unworkable—S corporation shareholder requirements for the Kushner-Iger purchase.
As typically is true for S corporations, the incremental tax cost for the state-law sellers—Walter, maybe Boehly, and potentially the minority shareholders—may be minimal. The cost of the step-up is asset-level gain, which for the Lakers’ low-basis intangibles may be close to fair market value. Add in any gain on tangible assets, and the total may approach the $12.5 billion valuation. Although this gain passes through to the selling shareholders, the corresponding basis increase in their stock generates an offsetting loss—and this symmetry explains why § 338(h)(10) or § 336(e) elections often are desirable for S corporations. Any residual gain is equal to what the state-law sellers otherwise would recognize.
In addition, the character of the state-law sellers’ asset-level gain and corresponding loss may wash or work out favorably. To the extent that the Lakers’ core intangibles—such as goodwill and going concern value that existed when Jerry Buss bought the franchise—predate § 197’s enactment in 1993, they are capital assets and generate long-term capital gain that, under the netting rules, is offset by a capital loss on liquidation. There’s a further potential tax advantage if this capital loss is short-term—it can offset short-term capital gains and a relatively nominal amount of individuals’ ordinary income. This character advantage presents a reason to accelerate closing, rather than defer it under the base scenario.
This scenario hinges on a lot of “ifs.” If the Lakers are held through an S corporation. If the sale constitutes a QSP or QSD. If Walter has 2026 short-term capital gains to turbocharge a short-term capital loss. But if these facts align, the confluence could unlock billions in tax benefits.
Why the Most Interesting Version of the Lakers’ Sale Probably Won’t Happen
There are three reasons, however, why this most interesting version of the Lakers’ sale is unlikely to occur. First, reaching the QSP or QSD threshold may not align with the facts or business deal. Under a maximalist construction, 85% of the Lakers is sold. Excluding Soon-Shiong drops the percentage to 80.5%. If the Buss family holds high-vote stock, the voting percentage might be lower. In any event, the deal sits at the quantitative threshold for a § 338(h)(10) or § 336(e) election.
Second, § 338(h)(10) and § 336(e) elections require consent from all S corporation shareholders, and the Buss family shareholders may not do so. Reports indicate that the Buss family will not participate in the state-law sale; they won’t get cash or part with shares. But they will participate in any § 338(h)(10) or § 336(e) election: 15% of the asset-level gain will flow through the Buss family, and they will experience a deemed liquidation like the selling shareholders. The asset-level gain should wash, on net, with the outside basis increase, but any baseline built-in gain—the current difference between the Buss shareholders’ basis in their shares and those shares’ fair market value—will be triggered without offset. For ESBTs, that difference would be taxable at top applicable rates under § 641(c), partially offset over time by the Buss owners’ share of new amortization deductions under a § 336(e) election with a fresh S corporation election. In a vanilla stock sale, none of the difference would be recognized, for zero incremental current tax due from the Buss shareholders. For this reason, the Buss family likely vetoes the asset-basis step-up without some additional inducement.
Third, California state tax may make a § 338(h)(10) or § 336(e) election unpalatable for Walter and the other selling shareholders. California generally follows the federal income tax characterization of § 338(h)(10) elections—a deemed asset sale and liquidation. The asset-sale gain would be California-source to the extent apportioned to California and taxable at a top rate of 13.3% at the shareholder level, plus an additional 1.5% state tax at the S corporation level. Any gain or loss on the deemed liquidation, however, would be sourced under the California rules for stock dispositions. Any loss for nonresident shareholders would not be California-source under the same rules that excluded gain under the vanilla case.
For these nonresident shareholders (think: Walter and Boehly), their pass-through asset-level gain would not net with their shareholder-level loss, leaving the asset-level gain to be taxed—effectively—on a gross basis. In this case, the California tax bill might exceed $1.6 billion, depending on shareholders’ residence and apportionment. Though this cost could be priced out with additional consideration from the buyers, that pressures the contingencies associated with the tax benefits and probably saps much of the appeal of a § 338(h)(10) election. California likely would apply similar treatment to § 336(e) elections, so the same issue would arise for this option as well. The bottom line: California state tax makes the vanilla version of the deal more attractive, and likely precludes the more interesting version from happening.
One More Alternative . . .
There’s another route to a (partial) basis step-up, this time through a hybrid corporate-partnership structure. The Los Angeles Lakers, Inc. could do an F reorganization into a successor holding company and convert into a limited liability company. Then, under Rev. Rul. 99-5, a sale of interests would be treated as a proportionate sale of each of the entity’s assets, followed by a contribution of those assets to a new partnership with fair market value basis—a partial step-up for the Lakers business and its intangibles. The new holding company would need to redeem Walter and any other selling shareholders under § 302, with the same federal tax offset and California tax mismatch as under the § 338(h)(10) and § 336(e) versions. This redemption cannot be integrated with the first-step F reorganization, and the regulations provide good—but not conclusive—authority for not doing so; the § 302 analysis is potentially trickier, depending on the ownership details and integration risk. The alternative route—a more recent legal technology—avoids the formalist strictures of the QSP and QSD regimes but introduces complexities in terms of partnership tax, transactional execution, and perhaps league rules.
Under this F reorganization structure, the asset-basis step-up would yield depreciation based on the proportion of interests sold, with no QSP or QSD required, and would be subject to a touchier analysis under § 197’s anti-churning rules. This version of the deal, however, would boost the tax cost to the Buss shareholders astronomically—15% of the asset-level gain from the proportion of interests sold, without the offset created by a deemed liquidation. Although the Buss shareholders would need to look to contract and state corporation law, rather than election requirements, to exercise a veto, they almost certainly would resist phantom gain of this magnitude.
Even if the Lakers’ sale turns out to be vanilla, the more elaborate tax options shed light on how dynamic these deals can be. Sometimes a sub rosa tax advantage can shape transactional economics and force a rethinking of the business deal. And even if the tax aspects of the Lakers’ sale are pedestrian, the eye-popping valuation and basketball implications are not—and those parts of the transaction will continue to garner headlines.
