Inter Miami owners Jorge Mas and David Beckham announced last week that they intended to close on a $9 million purchase of three acres of county-owned land in Miami’s Overtown that was needed for a soccer stadium — which was only weird in that they decided last year not to build a stadium there, but instead build one at Melreese Golf Course.
Now, the Miami Herald thinks it has an explanation: The Overtown land is part of one of Donald Trump’s “opportunity zones,” which would allow both the land and any businesses on it to be sold after ten years for a tax-free capital gain:
In the case of a soccer stadium, the owners could sell the land and the team after 10 years and any profits would be tax-free.
“When these stadiums get sold, they often come with the franchise,” said Peter Mekras, managing director of Aztec Group, a real estate investment firm. “If you make a major capital investment in an Opportunity Zone and the physical part appreciates in value and it’s a good business venture, you’re allowing a smart decision to be even smarter.”
Given that we’re talking an MLS franchise here, it’s not all that likely there would be much in the way of on-paper profits to get a tax break on — and stadiums tend not to appreciate in value, either. The only way Mas and Beckham could really score big would be if they can avoid capital gains taxes on the entire increased value of the franchise since Beckham bought it; remember, Beckham got an option to buy the team for a cut-rate $25 million, and expansion teams now go for $200 million a pop. Would the IRS let the team owners get away with claiming that Inter Miami was still only worth $25 million when it moved to Overtown, and the entire appreciation came while the team was playing there? I’ve been reading way too much about opportunity zones, and I couldn’t tell you for sure — this is ripe for further investigation by someone with more research time on their hands. (Hint, hint, Miami Herald.)
Of course, it’s also possible that Mas and Beckham have no intention of building a soccer stadium in Overtown, as they’ve repeatedly said is the case, and are just spending $9 million to finish the rest of a parcel that they can then either develop for something else or sell to another investor, knowing it comes with potential tax breaks. In which case the only real complaint here is that Miami-Dade County maybe should have charged more for the land if it comes with a bonus Trump gift coupon. This is why it’s generally a bad idea to have tax break programs with really confusing rules that were approved without public hearings: You’re very likely to end up with loopholes that investors can drive a truck through.