P.D.B. Sports, Ltd., Bowlen Sports, Inc., Tax Matters Partner v. Commissioner , 109 T.C. No. 20 ( 1997 )

109 T.C. No. 20UNITED STATES TAX COURT
P.D.B. SPORTS, LTD., BOWLEN SPORTS, INC.,
TAX MATTERS PARTNER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 730-96. Filed December 22, 1997.
An individual purchased more than a 50-percent
interest in a partnership, that owned and operated a
professional sports franchise. Partnership's presale
basis in player contracts was 6X. Because more than 50
percent of Partnership's ownership had changed, P
contends that sec. 708, I.R.C., causes a termination
and triggers the partnership basis provisions causing a
stepped-up basis (to fair market value) in the player
contracts to 36X. Partnership claimed amortization
deductions using the 36X basis. R contends that sec.
1056, I.R.C., applies and would limit the amortizable
basis in the player contracts, even though the
contracts were acquired through purchase of an interest
in a partnership. Alternatively, R contends that if
sec. 1056, I.R.C., does not apply to partnership
transactions involving sports franchises, the
partnership's basis would be less than claimed under
subch. K partnership provisions.
Held: Sec. 1056, I.R.C., does not apply to this
partnership transaction involving a sports franchise.
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Held, further: Partnership correctly computed the basis in
the player contracts under the subch. K basis adjustment
sections and regulations thereunder.
Richard P. Slivka and Charles D. Henson, for petitioner.
Randall L. Preheim, for respondent.
GERBER, Judge: Respondent issued notices of final
partnership administrative adjustments to P.D.B. Sports, Ltd.,
for the taxable years 1989 and 1990. Among other adjustments,
respondent disallowed amortization in the amounts of $1,878,056
and $259,255 for 1989 and 1990, respectively, claimed with
respect to professional football player contracts. After
concessions, the sole issue remaining for our consideration is
whether the partnership, for purposes of determining the
amortizable basis in player contracts, is subject to section
10561 in addition to, in conjunction with, or instead of the
subchapter K partnership provisions. Petitioner contends that
the partnership provisions apply exclusively and would, in this
case, permit the amortization of the fair market value of the
player contracts. Conversely, respondent contends that section
1056 applies to limit amortization to an amount equal to the
seller's basis, plus any gain recognized by the seller. In
1
All section and subchapter references are to the Internal
Revenue Code in effect for the years in issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure,
unless otherwise indicated.
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particular, the controversy centers on whether section 1056 was
intended to apply where the buyer acquires a partnership interest
in a partnership holding player contracts.
FINDINGS OF FACT2
Patrick Bowlen (Bowlen), after graduating from the
University of Oklahoma law school, practiced law for 2 years in
Calgary, Canada. Thereafter, he began a real estate development
business which he operated into the late 1980's. During 1984-85,
Bowlen acquired an interest as a general partner in a partnership
that was the franchised owner and operator of the Denver Broncos
(Broncos) professional football team, a member of the National
Football League (NFL). That partnership, P.D.B. Sports, Ltd.
(Bowlen I), was a Colorado limited partnership with its principal
place of business in Colorado at the time the petition was filed.
Prior to Bowlen's involvement in the Broncos, Bowlen I was
99.75-percent owned by Edgar F. Kaiser, Jr. (Kaiser), a Canadian
national.3 The remaining .25 percent of Bowlen I was also
indirectly owned by Kaiser, through a corporation E.F.K. Sports
Holdings, Ltd. (Kaiser I). Due to Bowlen's prior interest in
2
The parties' stipulation of facts and the attached
exhibits are incorporated herein by this reference.
3
Bowlen I, prior to the transactions in question and when
controlled by Kaiser, had been named E.F.K. Sports, Ltd. When
Bowlen acquired a partnership interest, he changed the
partnership name from E.F.K. Sports to P.D.B. Sports, Ltd.
(referred to as Bowlen I for purposes of this opinion).
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purchasing the Broncos, in late 1983, Kaiser approached Bowlen
about acquiring an interest in the partnership.
In 1984, Kaiser disposed of his entire interest in Bowlen I,
including his interest held through Kaiser I (the corporate
entity), in two separate transactions. First, during March 1984,
Kaiser sold about 39 percent of the Bowlen I partnership to John
R. Adams, through Adams' Colorado limited partnership, J.R.A.
Sports, Ltd. (Adams), for $10 million. Second, during March
1984, Kaiser entered into an agreement with Bowlen for the sale
of about 61 percent of the Bowlen I partnership. Bowlen's
purchase of Kaiser's Bowlen I partnership interest occurred on
June 1, 1984. Bowlen purchased about 59 percent of Kaiser's
partnership interest for $25,793,100 plus assumption of
$34,689,717 in Kaiser’s partnership liabilities. At the same
time, Bowlen also purchased the .25-percent partnership interest
held by Kaiser I for $106,900. Subsequently, Bowlen transferred
his aggregated partnership interest (about 61 percent) in Bowlen
I to his corporation, Texas Northern Productions, Inc., also
known as Bowlen Sports, Inc., (Bowlen II).
On June 1, 1984, Bowlen I was owned as follows:
Partner Percentage Ownership Type of Interest
Bowlen II 60.8 General partner
Adams 39.2 Limited partner
Bowlen II's and Adams' aggregate basis in their partnership
interests in Bowlen I was approximately $72,242,770. At the time
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of Bowlen's purchase, Bowlen I owned the following assets: the
NFL franchise for the Broncos, professional football player
contracts, a stadium lease, and television rights. Bowlen I's
adjusted basis in the player contracts on May 31, 1984, before
the sale of the partnership interests to Bowlen II, was
$6,510,555.4
Bowlen I treated the sale of the partnership interest to
Bowlen as causing a section 708(b)(1)(B) termination of the
partnership for Federal tax purposes. Adams consented to the
transfer of Kaiser's partnership interests to Bowlen and entered
into a new partnership agreement with Bowlen II in order to
prevent dissolution of the partnership under State law. The
Broncos franchise, held by Bowlen I, was not separately for sale.
The parties' transactions were in form and substance the sale of
partnership interests as opposed to a sale of the underlying
partnership assets.
A list of players, whose contracts existed at the time that
Bowlen acquired his interest, was used to determine the value of
the player contracts. During June 1984, the Broncos' general
manager contacted four individuals, including general managers
and/or individuals responsible for negotiating player contracts
4
The parties stipulated that the partnership had an
adjusted basis in the player contracts on May 31, 1984, in the
amount of $6,328,656; however, an exhibit reflects an adjusted
basis of $6,510,555. Respondent relied on the amount shown in
the exhibit on brief without objection by petitioner. We use the
$6,510,555 amount for purposes of this opinion.
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at four NFL teams, to wit, Chicago Bears, Cleveland Browns, New
York Giants, and Houston Oilers. These four individuals assigned
estimated values to the existing Bronco player contracts, which
when aggregated totaled $44,325,000, $43,450,000, $59,215,000,
and $35,790,000, respectively. The average of these assigned or
estimated total values is $45,695,000. Bowlen I's accountant
evaluated the assets of the partnership and the values assigned
to them by the partnership personnel. The accountant analyzed
and adjusted the values of the partnership assets and determined
that the fair market value of the player contracts was
$36,121,385 as of June 1, 1984, the date of the transfer of the
partnership interest to Bowlen. The accountant's analysis was
conducted under the approach contained in the subchapter K
partnership provisions where the appreciation in the value of the
assets over the partnership's presale basis in the assets is
allocated to the assets to account for the difference. The
difference between the partnership presale basis (approximately
$26 million) and Bowlen’s and Adams’ purchase price for the
partnership interests including assumptions of liability
(approximately $72 million) was about $46 million.5 The
accountant's asset valuations and conclusions regarding the
partnership's basis in the assets, including the player
5
The $72 million basis reflects adjustments made by the
partnership that are not germane to this case to account for
Bowlen’s acquisition costs and Adams’ share of partnership income
prior to the sec. 708 termination.
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contracts, were premised on the assumption that the mandatory
basis adjustment rules of section 732(d) applied.
Bowlen I began amortizing the player contracts on June 1,
1984, using a 5-year useful life. After assigning values to the
partnership's assets other than the NFL Broncos franchise, the
partnership assigned the residual amount of Bowlen and Adams'
basis in their partnership interests to the franchise. Bowlen I
did not make a section 754 election in 1984. During 1984 through
1988, Bowlen I reported amortization expenses and writeoffs of
the player contracts in issue in excess of $34 million.
In September 1985, P.D.B. Enterprises, Inc. (Bowlen III),
purchased Adams' 39.2-percent partnership interest in Bowlen I
for $20 million. Bowlen III was wholly owned by Bowlen II.
During the years in issue, Bowlen I was owned as follows:
Partner Percentage Ownership Type of Interest
Bowlen II 60.8 General partner
Bowlen III 39.2 Limited partner
When the 60.80-percent partnership interest in Bowlen I was
originally purchased, Kaiser did not provide Bowlen with
information about whether Kaiser recognized any gain attributable
to the player contracts. Nor did Bowlen ask Kaiser for such
information. No evidence was presented at trial by either party
about the amount of gain recognized by Kaiser from the sale of
his partnership interest to Bowlen or the portion of that gain
attributable to player contracts. Evidence of the gain
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recognized by Kaiser may have been contained in Kaiser's 1984
Federal income tax return. The Internal Revenue Service
destroyed Kaiser's return as part of its normal practices and
procedures for destruction of old tax returns. Kaiser, a
Canadian national, did not testify at trial.
OPINION
I. Background
As part of the Tax Reform Act of 1976, Pub. L. 94-455, 90
Stat. 1520, legislation was enacted to address certain tax
aspects of transactions involving professional sports franchises.
One major aspect concerned the amortization of the costs of
player contracts. Laird v. United States, 556 F.2d 1224 (5th
Cir. 1977); First Northwest Indus. v. Commissioner, 70 T.C. 817(1978), revd. and remanded on other grounds 649 F.2d 707 (9th
Cir. 1981). Section 1245(a)(4) was enacted to require
depreciation recapture regarding player contracts when a sports
team is sold irrespective of whether the contracts are actually
resold.6 Concerning the issues in this case, legislation was
enacted to prevent a sports team purchaser from allocating more
than a fair market value portion of the purchase price to player
contracts.
6
Player contracts are sec. 1231 property. Generally, the
sale or exchange of player contracts results in capital gain
treatment for the seller's income, subject to the aggregation
requirements of sec. 1231.
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In particular, it was thought that purchasers of sports
franchises were over allocating basis to player contracts and
inflating amortization. Congress, by enacting section 1056,
sought to employ an approach that would require the seller and
buyer to use the same arm's-length or fair market value amount to
report income or claim deductions resulting from a sports
franchise transaction. Section 1056(a) provides:
(a) General Rule.--If a franchise to conduct any
sports enterprise is sold or exchanged, and if, in
connection with such sale or exchange, there is a
transfer of a contract for the services of an athlete,
the basis of such contract in the hands of the
transferee shall not exceed the sum of--
(1) the adjusted basis of such contract in
the hands of the transferor immediately before the
transfer, plus
(2) the gain (if any) recognized by the transferor
on the transfer of such contract.
In addition to equating the buyer's basis with the seller's
reporting position, the basis of acquired player contracts may
also be affected by the section 1056(d) rebuttable presumption
that no more than 50 percent of the purchase price of a sports
team is to be allocated to player contracts. To rebut the
presumption a taxpayer must "[establish] to the * * *
[Commissioner's satisfaction] that a specified amount in excess
of 50 percent is properly allocable". Sec. 1056(d).
The question considered here is whether the purchase of an
interest in a partnership entity that holds and operates a sports
franchise is a sale or exchange of "a franchise to conduct any
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sports enterprise" within the meaning of section 1056(a). There
was little dispute by the parties about the transactional facts.
Upon the transfer of the partnership interest from Kaiser to
Bowlen, Bowlen I adjusted its basis in the player contracts to a
value of approximately $36 million in accordance with the
mandatory basis adjustment rules of section 732(d), accompanying
regulations, and related statutes.7 Bowlen I adjusted its basis
in the player contracts without regard to whether Kaiser
recognized gain from the player contracts.
Respondent determined that the partnership's basis in the
player contracts acquired with the Broncos franchise is limited
by section 1056(a), i.e., that the basis of the player contracts
is limited to the presale partnership basis in the player
contracts ($6,510,555) plus any gain that Kaiser recognized on
the sale of his partnership interests allocable to the player
contracts. Respondent's determination must be based on the
inferential premise that section 1056(a) applies to the indirect
purchase and sale of a sports franchise held in partnership form.
As there is no evidence that Kaiser recognized gain from the
player contracts, respondent also maintains that the basis in the
7
It is noted that the $36 million basis for the player
contracts would have fallen within the sec. 1056(d) presumption
provision that no more than 50 percent of the total purchase
price of a sports team is to be allocable to player contracts.
If sec. 1056 applied here, the partnership would not have been
statutorily required to establish to respondent’s satisfaction
the portion of the basis allocation in excess of 50 percent to
respondent's satisfaction.
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partnership's player contracts is limited to the presale basis in
the contracts.
Respondent argues that section 1056 would limit the
amortizable basis of the partnership's player contracts in this
case. Respondent, however, does not discuss or explain how or if
the section 1056 limitation would otherwise affect partnership
provisions, including sections 732(d), 743(b) and/or 754 which
may have been considered or have been in play in the transaction
under consideration. Respondent does not explain whether section
1056 would preempt the application of other basis requirements
and/or elections under subchapter K or whether it would be
integrated in some manner. These unanswered questions are
problematic and complicate our proper analysis of respondent's
determination. Additionally, no regulations have been issued
under section 1056, although, in the 1976 legislation, respondent
was statutorily mandated to issue regulations.
In the alternative, if we decide that the partnership
provisions of subchapter K apply to the exclusion of section
1056, respondent argues that the partnership incorrectly computed
its basis in the player contracts, and, as a result, no player
contract bases remain to be amortized.
II. Section 1056--Does It Apply to Partnership Transactions?
Section 1056 applies to a "sale or exchange" of a sports
franchise. In this case, the sports franchise was held in
partnership form so that any sale or exchange of a sports
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franchise could have only occurred indirectly. In order for the
section 1056 language to literally apply here, respondent must,
in some manner, ignore the partnership as an entity. Respondent
makes two separate arguments in support of the section 1056
determination. First, respondent argues that the sale of the
partnership interest constituted a sale of the partnership's
underlying assets if the aggregate theory of partnerships is
employed. Respondent's second argument poses a theoretical sale
or exchange to address that section 1056 requirement. Respondent
contends that the sale of a partnership interest causes a
constructive partnership termination resulting in a deemed
distribution of partnership property and a deemed contribution of
the property to a new partnership. Under respondent's second
argument, the deemed distribution and contribution are
hypothesized to be the section 1056 "sale or exchange" of the
partnership's property.8
We note that respondent does not contend that the Bowlen I
partnership is a sham or should be disregarded because it had
been created to avoid the application of section 1056. In
addition, respondent does not argue that Bowlen acquired the
assets of Bowlen I in a two-step transaction over the 1984-85
period. We agree with petitioner and hold that there was no
8
Respondent, in the second argument, alternatively attempts
to address how a "sale or exchange" could occur even if we were
to hold that sec. 1056 should be applied to subch. K transactions
under the entity theory.
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"sale or exchange" of a sports franchise or player contracts
within the meaning of section 1056.
In general, the sale of a partnership interest does not
affect the basis of partnership property, and the issue of
whether section 1056 should apply to the sale of a partnership
interest would be irrelevant. A partnership may be able to
increase the basis of certain assets upon a sale of a partnership
interest where the sale causes a constructive termination of the
partnership. See sec. 708(b)(1)(B). Section 708(b)(1)(B)
provides for a partnership's termination on a sale or exchange of
50 percent or more of the total interest in the partnership’s
capital and profits within a 12-month period. The termination
results in a deemed distribution of partnership property to the
new and continuing partners (Bowlen and Adams) and a deemed
recontribution of the property to a newly formed partnership.
Sec. 1.708-1(b)(1)(iv), Income Tax Regs.
Section 1.708-1(b)(1)(iv), Income Tax Regs., states, in
pertinent part:
(iv) If a partnership is terminated by a sale or
exchange of an interest, the following is deemed to
occur: The partnership distributes its properties to
the purchaser and the other remaining partners in
proportion to their respective interests in the
partnership properties; and, immediately thereafter,
the purchaser and the other remaining partners
contribute the properties to a new partnership * * *
For election of basis adjustments by the purchaser and
other remaining partners, see sections 732(d) and
743(b) and paragraph (d) of section 1.732-1 and
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paragraph (b) of section 1.743-1.[9] [Citations
omitted.]
Upon a distribution of partnership property, each partner’s
basis in his partnership interest is allocated among the
distributed assets in proportion to the assets' respective bases
to the partnership. Sec. 732(b) and (c). The partnership's
bases in its assets may be adjusted under section 743(b) before
the partnership distribution to reflect changes in the fair
market value of partnership property in relation to the
partnership's adjusted bases in the assets. The partnership’s
basis, after being adjusted in accord with section 743(b), is
then used to allocate basis among the distributed assets. Upon
recontribution of the property to the new partnership, the
partnership takes the partner's basis in the property at the time
of contribution. Sec. 723.
In this case, a section 708(b) constructive termination
would have occurred due to the sale of more than a 50-percent
partnership interest. The assets of Bowlen I, including the
Broncos franchise and professional football player contracts,
would be deemed to have been distributed to Bowlen and Adams and
recontributed to a new partnership. Sec. 1.708-1(b)(1)(iv),
9
Sec. 1.708-1(b)(iv), Income Tax Regs., was amended by T.D.
8717, 1997-24 I.R.B. 5 (May 8, 1997), to apply to sec. 708
terminations occurring after May 8, 1996. The amended regulation
would not apply in this case. The changes may cause a result
different than the one dictated by the regulations in existence
for the 1984 taxable year, the year in which a sale of a 50-
percent interest in Bowlen I occurred.
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Income Tax Regs. Prior to the deemed distribution, the bases of
Bowlen I's assets would be adjusted to reflect their fair market
values under section 743(b) based on the assumption that the
mandatory basis adjustment of section 732(d) applied.10 Upon the
deemed distribution, Bowlen I would use the fair market values of
the assets to allocate Bowlen’s and Adams' bases in their
partnership interests among the partnership assets pursuant to
section 732(c) basis allocation rules. Bowlen I followed the
above-outlined statutory process and did not consider the amount
of gain that the selling partner (Kaiser or his wholly owned
corporation) may have recognized on the player contracts or the
terminated partnership's presale basis in the contracts in
determining the contracts' basis. Therefore, Bowlen I's basis in
the player contracts was determined without reference to the
section 1056(a) basis limitation requirements.
A. Respondent's First Argument--Section 1056 If Applied to a
Subchapter K Transaction Using the Aggregate Approach to
Partnerships Would Result in a "sale or exchange" of a Sports
Franchise and Player Contracts Within the Meaning of That Section
Section 1056(a) specifically applies to a "sale or exchange"
of a sports franchise. There is no reference to indirect
transfers of sports franchises through intermediate entities,
10
Respondent challenges whether Bowlen I was entitled to
adjust the assets to their fair market values and use the fair
market values to allocate bases among the assets under the
partnership provisions. Respondent argues that Bowlen I should
have allocated bases among its assets in proportion to the
terminated partnership's presale adjusted basis in the assets.
This matter is addressed later in the opinion.
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such as a partnership. Section 1056 has not previously been
considered by any court. Significantly, although regulations are
mandated in the statute, since its enactment 20 years ago, none
have been issued. The absence of regulations (interpretative or
legislative), however, does not limit our ability to interpret
the statute and decide the issues presented in this case.
In construing a statute, we generally give effect to the
plain and ordinary meaning of its language. United States v.
Locke, 471 U.S. 84, 93, 95-96 (1985); United States v. American
Trucking Associations, Inc., 310 U.S. 534, 543 (1940). Words
with a fixed legal or judicially settled meaning, on the other
hand, generally must be presumed to have been used in that sense
unless such an interpretation would lead to absurd results. See
United States v. Merriam, 263 U.S. 179, 187 (1923); Lenz v.
Commissioner, 101 T.C. 260, 265 (1993). Our principal objective
in interpreting any statute is to determine Congress' intent in
using the statutory language being construed. United States v.
American Trucking Associations, Inc., supra at 542; General
Signal Corp. & Subs. v. Commissioner, 103 T.C. 216, 240 (1994),
supplemented by 104 T.C. 248 (1995). When a statute is
ambiguous, we may look to its legislative history and the
purposes for its enactment. United States v. Ron Pair Enters.,
Inc., 489 U.S. 235, 241 (1989); Peterson Marital Trust v.
Commissioner, 102 T.C. 790, 799 (1994), affd. 78 F.3d 795 (2d
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Cir. 1996). In addition, we may seek out any reliable evidence
as to the legislative purpose even where the statute is clear.
United States v. American Trucking Associations, Inc., supra at
543-544; Centel Communications Co. v. Commissioner, 92 T.C. 612,
628 (1989), affd. 920 F.2d 1335 (7th Cir. 1990). We use these
general principles of statutory interpretation to determine the
scope of section 1056 and/or the application of the subchapter K
basis adjustment rules.
The parties couch the question of whether section 1056
applies to the sale of an interest in a partnership holding a
sports franchise in terms of the threshold inquiry of whether a
partnership should be treated as an entity or aggregate. As
explained above, respondent seeks to employ the aggregate
approach to cause a more direct relationship to the partnership's
assets when an interest in the partnership changes hands.
Conversely, petitioner contends that the partnership should be
treated as an entity for purposes of our consideration of section
1056. In determining whether section 1056 should apply to the
sale of a partnership interest, our analysis considers both the
legislative intent in enacting section 1056 and the structure and
scope of the subchapter K basis adjustment rules.
1. Legislative Intent With Regard to the Application of Section
1056 to Partnership Transactions
"The theory concerning partnerships as entities is not
easily defined. It is well established that the partnership form
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is a hybrid--part separate entity, part aggregate." Schneer v.
Commissioner, 97 T.C. 643, 660 (1991). For purposes of
interpreting Code provisions outside of subchapter K, a
partnership may be treated as either an entity, separate from its
partners, or an aggregate of its partners depending on which
characterization is more appropriate to carry out the intent
and/or purpose of the particular Internal Revenue Code section
under consideration. Brown Group, Inc. & Subs. v. Commissioner,
104 T.C. 105, 116 (1995), vacated and remanded on other grounds
77 F.3d 217 (8th Cir. 1996); Casel v. Commissioner, 79 T.C. 424,
432-433 (1982).
Respondent argues that Congress intended section 1056 to
apply broadly, to include the sale of an interest in a
partnership that operates a sports franchise. Respondent
contends that the section 1056 legislative history contains
indications that Congress sought to prevent inconsistent player
contract valuations by sellers and buyers of sports teams.
Finally, respondent contends that if section 1056 is not applied
to the sale of a partnership interest, inconsistent valuations of
player contracts could occur, contrary to congressional intent.
Relying on those points, respondent maintains that it is
appropriate to apply the aggregate theory of partnerships for
purposes of section 1056's application to partnership
transactions to prevent this perceived abuse.
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Petitioner contends that section 1056 is unambiguous, makes
no reference to partnership transactions, and applies only to
transactions directly involving sports franchises not including
the sale of a partnership interest. Finally, petitioner argues
that legislative history is inconclusive and, in any event,
irrelevant because the statute is unambiguous. Because
partnerships can be and have been treated as an aggregate or
entity, we must disagree with petitioner's contention that
section 1056 is unambiguous. Petitioner is of the view that the
entity approach is to be applied to Internal Revenue Code
provisions that are outside of subchapter K unless Congress
provides otherwise. No such presumption favoring the entity
approach exists.
Congress used the pervasive tax terminology "sale or
exchange" to categorize the transactions subject to section
1056(a) basis provisions and limitations. Two types of transfers
of sports franchises were expressly exempted from the section
1056(a) basis limitation, section 1031 like-kind exchanges and
transfers from a decedent. Sec. 1056(b). Neither exception
references partnership interests or provides guidance, one way or
the other, on the congressional intent. Section 1056 does not
mention the transfer of an interest in a partnership holding a
sports franchise. Moreover, the legislative history does not
contain any reference to the imposition of the basis limitation
rules of section 1056 on the transfer of partnership interests.
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The legislative history emphasizes that section 1056 was
enacted to prevent inconsistent valuations of player contracts by
purchasers and sellers of professional sports franchises. H.
Rept. 94-658, at 115-117 (1975), 1976-3 C.B. (Vol. 2) 695, 807-
809; S. Rept. 94-938 at 87-88 (1976), 1976-3 C.B. (Vol. 3) 49,
125-126.11 Section 1056 was intended to cause the tax
consequences on the sale of sports franchises to be subject to an
arm's-length and balanced posture. That is accomplished by using
the seller's basis plus any gain recognized by the seller as the
standard for the buyer's basis in player contracts. H. Rept. 94-
658, at 117; 1976-3 C.B. (Vol. 2) at 809; S. Rept. 94-938 at 87-
88, 1976-3 C.B. (Vol. 3) at 125-126.
We disagree with respondent's contention that inconsistent
valuations of player contracts would automatically occur in
transactions involving a sports franchise held within a
partnership. Provisions within subchapter K protect against
inconsistent valuations of partnership property by buying and
11
The purchaser of a sports franchise would be motivated to
allocate a larger portion of the purchase price to player
contracts because the costs of player contracts are amortizable.
Likewise, there would be less motivation to allocate cost to the
franchise rights and goodwill which are not amortizable.
Conversely, sellers would be motivated to allocate little of the
purchase price to player contracts because gain recognized on the
sale of player contracts may be subject to sec. 1245 depreciation
recapture and treated as ordinary income. Sellers would also be
motivated to allocate a larger portion of the purchase price to
unamortizable assets, such as franchise rights, any gains on
which may be taxable at capital gain rates and are not subject to
recapture provisions.
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selling partners. Under section 751, the selling partner
(Kaiser) would be required to recognize any gain attributable to
the amortization deductions on the player contracts as ordinary
income. Sec. 751(a), (c). Section 751 would prevent the selling
partner from converting section 1245 depreciation recapture
income from the player contracts into capital gain. Accordingly,
without considering section 1056, the seller's reporting
requirements are congressionally mandated under subchapter K and
section 1245. The selling and buying partners are bound to
allocate the purchase price of the partnership interest to
particular section 751 partnership assets as provided in the
terms of their sales agreement. Sec. 1.751-1(a)(2), Income Tax
Regs. There is no subchapter K provision similar to section
1056;12 however, under subchapter K, the focus is not on
inconsistent asset valuations by individuals buying and selling
partnership interests.
Respondent also relies on the Staff of the Joint Committee
on Taxation, General Explanation of the Tax Reform Act of 1976
(J. Comm. Print 1976) (hereinafter General Explanation) as
support for the position that the term "sale or exchange" as used
in section 1056 includes a sale of a partnership interest in a
sports team. The General Explanation states at 86 that section
12
Under sec. 1056, to prevent a buyer from inflating the
basis of player contracts, the buyer is limited to the seller's
basis and any recognized gain on the contracts.
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1056 applies to "the sale, exchange, or other disposition of a
sports franchise." The General Explanation is prepared by the
staff of the Joint Committee on Taxation and is generally not
considered to be legislative history. Courts, however, have
referenced the General Explanation in opinions involving the
interpretation of statutes. See, e.g., FPC v. Memphis Light,
Gas & Water Div., 411 U.S. 458, 471-472 (1973); Todd v.
Commissioner, 89 T.C. 912, 917-918 (1987), affd. 862 F.2d 540(5th Cir. 1988). In any event, the General Explanation does not
contain elucidation or clear guidance on the application of
section 1056 to transfers of partnership interests, as respondent
argues. The General Explanation contains the amorphous phrase
"other disposition of a sports franchise" which we find
inconclusive on the question of whether partnership transactions
are covered by section 1056. To accept the "other disposition"
language as including the transfer of a partnership interest
would, of necessity, require us to ignore and/or circumvent
certain of the subchapter K special basis adjustments available
to a buying partner and other basis provisions governing
partnership transactions.
In that connection, the integration into subchapter K of a
basis limitation like that contained in section 1056 would be a
complex and arduous task. Subchapter K already contains a
complex and comprehensive set of basis provisions designed to
address the unique aspects of a pass-through entity. Such an
- 23 -
integration would present numerous choices and policy decisions
that the statute, legislative history, and respondent have failed
to address.
Section 1060 provides an example of the integration of basis
rules into subchapter K. Section 1060 was enacted in 1986
subsequent to the transaction in question and is inapplicable in
this case.13 Nevertheless, the enactment of section 1060
provides an example of the complexity and difficulties involved
in a section 1056 integration into partnership transactions.
Sections 1056 and 1060 each control the allocation of
purchase price to individual assets, albeit by different means.
Section 1060 requires the seller and buyer in certain prescribed
asset sales to allocate the purchase price among acquired assets
using the residual allocation method. Under that method, a
taxpayer generally allocates the purchase price among acquired
assets to the extent of their fair market values in descending
order of priority starting with cash and tangible and intangible
assets other than goodwill and going concern value. Sec.
1060(a); sec. 1.1060-1T(a)(1), (d), Temporary Income Tax Regs.,
53 Fed. Reg. 27039, 27040 (July 18, 1988). The residual of the
purchase price is then allocated to goodwill and going concern
value. Sec. 1.1060-1T(d), Temporary Income Tax Regs., 53 Fed.
13Sec. 1060, enacted by sec. 641(a) of the Tax Reform Act
of 1986, Pub. L. 99-514, 100 Stat. 2282, applies to asset
acquisitions after May 6, 1986, unless entered under a binding
contract in effect on that date and at all times thereafter.
- 24 -
Reg. 27040 (July 18, 1988). Allocation of the purchase price to
the individual assets determines the seller's gain or loss on the
sale of the assets and the buyer's bases in the acquired assets.
As initially enacted, section 1060 did not address the
transfer and allocation involving partnership interests. In
1988, section 1060(d) was added specifically to require the use
of the residual method for distributions of partnership property
to partners and for transfers of partnership interests for
purposes of determining the value of goodwill or going concern
value in applying section 755. The 1988 amendment included
detailed provisions to enable section 1060 principles to be
integrated into the generally self-contained provisions of
subchapter K. The absence of express provisions in section 1056
to address partnership transactions more likely indicates that it
does not apply to basis adjustments available to partners who
purchase partnership interests. Any ambiguity or omission in
section 1056 logically could have been cured by amendment.
2. Interplay Between Section 1056 and the Subchapter K
Partnership Provisions
In deciding that section 1056 does not apply to the sale of
a partnership interest, we have considered the effect that
section 1056 would have on the integrity and continuity of
subchapter K. In that regard, petitioner contends that we should
not apply section 1056 on an ad hoc basis to subchapter K because
to do so would undermine the partnership basis provisions.
- 25 -
Subchapter K contains several detailed provisions governing basis
adjustments and allocations in partnership transactions. See
secs. 732, 743, 754, and 755. Generally, subchapter K employs
the entity approach in treating transfers of partnership
interests. The sale of a partnership interest is treated as the
sale of a single capital asset rather than as a transfer of the
individual assets of the partnership. See secs. 741 and 742.
Aggregate concepts, however, are also employed upon the
transfer of partnership interests. For example, the basis of
partnership property may be adjusted under the partnership
provisions upon the sale of a partnership interest in accordance
with section 743(b). The basis adjustment under section 743(b)
places a buying partner in the same position as if that partner
had purchased an undivided proportionate share of the partnership
property. Section 743(b) enables the purchaser of a partnership
interest to increase the depreciable basis of appreciated
partnership property to parallel the acquisition costs. Section
743(b) also protects a new partner by increasing basis to avoid
taxation on any inflated gains that could occur if the
partnership interest is later sold.
These basis adjustments were statutorily provided to
individuals who purchase partnership interests, and we are
reluctant to vary from this approach without a clear legislative
mandate for partnerships owning sports franchises. The
partnership here applied the section 743(b) special basis
- 26 -
adjustments believing that the mandatory basis adjustment of
section 732(d) applied. The mandatory basis adjustment prevents
a buying partner from shifting basis allocation from
nondepreciable or unamortizable property to depreciable or
amortizable property under the section 732(c) basis allocation.
Similarly, section 1056 is intended to prevent overvaluation of
amortizable player contracts and undervaluation of the
unamortizable sports franchise by buyers of sports teams. The
only difference, however, is that the partnership provisions do
not restrict the basis adjustment of a particular partnership
asset to the partnership's presale basis plus any gain recognized
by the selling partner.
We are satisfied that subchapter K provisions are sufficient
to determine the basis of partnership property and include
sufficient safeguards (such as section 732(d) and accompanying
regulations) to prevent inflation of the depreciable or
amortizable basis of property.14 We are also satisfied that
Bowlen I did not overvalue the player contracts in issue. In
some respects, the partnership's player contract valuation
complies with the section 1056(d) provision involving the
14
We recognize, however, that subch. K may permit a
purchaser of a partnership interest to obtain increased
amortizable basis in the player contracts even though the selling
partner may not have recognized depreciation recapture income on
those contracts. This could occur when a buying partner and
selling partner have not allocated the total purchase price of
the partnership interest among the individual partnership assets
in a sales contract.
- 27 -
presumption and requirements for allocating more than 50 percent
to player contracts. Bowlen I obtained four estimates of the
value of the Broncos' player contracts on the date of the sale of
the partnership interest from general managers and personnel
specialists of other NFL teams. The estimates ranged from
$35,790,000 to $59,215,000, with an average amount approximating
$45,700,000. Bowlen I assigned approximately $36 million as the
fair market value of player contracts, which amount equates with
50 percent of the approximate $72 million aggregate cost for
Bowlen and Adams' partnership interests. It should be emphasized
that a conservative valuation was used, and (as explained later
in this opinion) we find this assigned value was the fair market
value at the time of acquisition.
Petitioner's argument focuses on the factor that Kaiser's
gain attributable to the player contracts should have been
derived from the $36 million amount used by the partnership for
amortization purposes. Respondent, however, focuses on
petitioner's inability to prove the actual amount of gain that
Kaiser recognized from the contracts, under the basis limitation
rules of section 1056(a). Neither party offered direct evidence
showing the gain, if any, that the seller (Kaiser) may have
recognized on the sale of the partnership interests attributable
to the player contracts. Without such evidence, as required
under section 1056(a), respondent argues that the basis in the
player contracts is limited to the partnership's presale basis.
- 28 -
Further exacerbating the dilemma here, respondent, in accord with
established practices, destroyed the seller's income tax return
that might have shed light on this question.
The $36,121,385 basis for the player contracts used by the
partnership does not exceed the value of the contracts or provide
any tax benefit not otherwise available to the partners.
Amortization of the fair market value in accord with the
partners' acquisition costs for partnership property is an
appropriate deduction under subchapter K. Any tax advantage that
may have occurred in the circumstances of this case would have
been due to the seller's (Kaiser's) failure to report sufficient
gain or his mischaracterization of gain as capital upon the sale
of his partnership interest. Respondent argues, but is unable to
show, that Kaiser was able to have the benefit of capital gain on
the sale of his partnership interest without recapture in the
form of ordinary income of any amortization that may have been
taken on the player contracts.
B. Respondent's Alternative Argument--A Deemed Distribution
and Recontribution of Partnership Property Under Section 731
Constitutes a "sale or exchange" Within the Meaning of Section
1056
Respondent alternatively argues that if we hold that a
partnership is to be treated as an entity for purposes of
applying section 1056, a sale or exchange of the partnership
assets nevertheless occurred under the entity theory.
Responent’s alternative argument is premised on the contention
- 29 -
that a sale or exchange of a sports franchise and player
contracts within the meaning of section 1056(a) occurred on the
deemed distribution and recontribution of partnership property
attributable to the partnership's constructive section 708
termination. Respondent relies on section 731 as support for the
position that an exchange occurs when a partnership makes a
liquidating distribution of partnership property to its
partners.15
Section 731(a) defines the circumstances under which a
partner recognizes gain or loss from partnership distributions
and provides that "Any gain or loss recognized under this
subsection shall be considered as gain or loss from the sale or
exchange of the partnership interest of the distributee
partner."16 Sec. 731(a). Respondent maintains that there is
tacit recognition in section 731 that a deemed partnership
distribution constitutes a sale or exchange regardless of whether
the partner recognizes gain or loss on the distribution.
Respondent, relying on section 721, continues with the additional
premise that the deemed recontribution of the partnership
15
It is noted that any distribution of property in this
case would have been theoretically deemed to have occurred under
the statutes and regulations and that no actual distribution in
kind occurred.
16
Generally, a partner recognizes gain upon the
distribution of partnership property only to the extent that
money distributed exceeds the partner's basis in his partnership
interest. Sec. 731(a)(1).
- 30 -
property to the new partnership is an exchange. Section 721
provides that "No gain or loss shall be recognized to a
partnership or to any of its partners in the case of a
contribution of property to the partnership in exchange for an
interest in the partnership."
Respondent's reliance on section 731 is misplaced. The
purpose of the above-quoted portion of section 731 is to
characterize the gain or loss recognized on partnership
distributions as capital or ordinary in nature. See sec. 1.731-
1(a)(3), Income Tax Regs. Section 741 provides for the
characterization of income or loss from the sale or exchange of a
partnership interest as capital, except as provided in section
751 (relating to unrealized receivables and inventory items that
have substantially appreciated in value). Section 731(a), in
turn, subjects the tax consequences of partnership distributions
to the gain or loss characterization rule of section 741.
Moreover, section 731(a) provisions apply to nonliquidating and
liquidating distributions. It would be inappropriate to treat
partners who receive current distributions from a partnership as
selling their partnership interests, which respondent's argument
would seem to require. Rather, a partner who receives a
nonliquidating distribution is treated as selling his partnership
interest only for purposes of characterizing the gain recognized
by the partner.
- 31 -
The phrase "sale or exchange" appears in several tax
statutes and has been the subject of numerous opinions. The
customary meaning of "sale or exchange" implies a reciprocal
transfer. Helvering v. William Flaccus Oak Leather Co., 313 U.S.
247, 249 (1941). The phrase "sale or exchange" has been
interpreted in some circumstances to include a distribution of
partnership property in liquidation of a partnership interest.
However, a partnership distribution does not necessarily qualify
as a sale or exchange. For example, a liquidating distribution
of a 50-percent or more partnership interest is not treated as a
sale or exchange of the partnership interest for purposes of a
section 708(b)(1)(B) constructive termination. Sec. 1.708-
1(b)(1)(ii), Income Tax Regs. Whether a partnership distribution
is a sale or exchange of the distributed partnership property
depends on the statutory mandate of the section sought to be
applied to the particular subchapter K transaction.
Respondent's second or alternative argument to apply section
1056 to subchapter K transactions would raise difficult and yet
unanswered questions, such as whether the partnership or selling
partner should be considered to be the transferor of the assets
for purposes of section 1056. Under respondent's view, the
buying partner's basis would be limited to the terminated
partnership's presale basis plus gain recognized by the selling
partner (Kaiser) on the player contracts. Section 1056(a) limits
the buyer's basis in player contracts to the transferor's basis
- 32 -
plus gain recognized by the transferor on the contracts.
Accordingly, respondent's position requires both the selling
partner (Kaiser) and the terminated partnership to be treated as
the transferor for purposes of section 1056 on the deemed
distribution.
The section 708 regulations provide that the deemed
distribution is from the terminated partnership. Sec. 1.708-
1(b)(1)(iv), Income Tax Regs. The normal rule is that a
partnership does not recognize gain on a liquidating distribution
to a partner. See sec. 732(a). Consequently, if only the
terminated partnership was treated as the transferor for purposes
of section 1056(a), a buying partner would be limited to the
partnership's presale basis in the contracts even if the selling
partner recognized gain from the player contracts. Respondent
does not seek that result.
For Kaiser to be the transferor (seller) on the deemed
distribution, however, the aggregate partnership theory would
need to be employed. Consistent with our prior discussion, the
aggregate theory of partnership would not be appropriate for
purposes of section 1056. Respondent's argument that a section
1056 "sale or exchange" occurs on a deemed distribution and
recontribution requires treating the partnership as an aggregate
of its partners. Accordingly, we conclude that a partnership
distribution does not constitute a sale or exchange of the
- 33 -
distributed partnership assets under section 1056, and Bowlen I's
basis in the player contracts is not subject to section 1056.
III. Has Bowlen I Correctly Computed the Basis of Partnership
Assets Under the Partnership Provisions?
A. Burden of Proof as to Fair Market Value of Player
Contracts
As a threshold and procedural matter, petitioner argues that
any question concerning the partnership's basis computation under
the partnership provisions is a new matter for which respondent
should bear the burden of proof. Rule 142(a). Petitioner
contends that respondent raised the question concerning the
subchapter K basis computation for the first time at trial and
that issue constitutes a new matter. Respondent argues that,
although this issue was not addressed in the notices of final
partnership administrative adjustment, petitioner raised the
issue by alleging in the pleading that the player contracts’
bases were correctly determined under subchapter K.
Respondent, under section 1056, determined that the
partnership was not entitled to amortization of certain player
contracts for the years under consideration. Petitioner alleged
that respondent erred in applying section 1056 and not accepting
the approach utilized by the partnership. Petitioner's
allegations in the petition address the question of whether the
section 1056 limitations would affect the amount of basis
available for amortization. In the notice of final partnership
administrative adjustments, respondent did not determine that the
- 34 -
basis amount used by the partnership for the player contracts was
incorrect, except insofar as it was limited by the requirement of
section 1056(a).
Generally, * * * [taxpayers] [bear] the burden of
proof. Rule 142(a); Welch v. Helvering, 290 U.S. 111(1933). Respondent, however, bears the burden of proof
as to "any new matter, increases in deficiency, and
affirmative defenses, pleaded in the answer". Rule
142(a). A new position taken by * * * [the
Commissioner] is not necessarily a "new matter" if it
merely clarifies or develops * * * [the Commissioner’s]
original determination without requiring the
presentation of different evidence, being inconsistent
with * * * [the Commissioner’s] original determination,
or increasing the amount of the deficiency. Achiro v.
Commissioner, 77 T.C. 881, 889-891 (1981) * * * .
[Citations omitted.]
Seagate Tech., Inc., & Consol. Subs. v. Commissioner, 102 T.C.
149, 169 (1994).
Respondent raised, for the first time at trial, the question
of whether the partnership correctly valued partnership assets
and hence was required to use section 732(d) to allocate partner
acquisition costs to basis. That question or issue was raised by
respondent as an alternative argument if we should find that
section 1056 did not apply. Petitioner, up until the trial,
simply argued that section 1056 did not apply as determined and
that the partnership's reporting position was, therefore,
correct.
Going into the trial, the sole issue confronting petitioner
was whether the limitations of section 1056 applied to the
partnership's basis in player contracts. Petitioner had
- 35 -
stipulated the estimates made by the four NFL teams and the
adjustment made by the partnership's accountant to arrive at a
$36,121,385 fair market value and basis for the player contracts.
That evidence was stipulated to provide background for the
factual scenario needed to address the section 1056 question.
Petitioner did not plan to offer expert testimony on value
because respondent's determination did not question the value of
the player contracts. Petitioner would have been required to
present additional evidence to address respondent's alternative
argument, raised for the first time at trial. Accordingly,
respondent bears the burden of proof with respect to the question
of whether partnership's valuation of the player contracts was
correct.
B. Respondent's Alternative Argument
Having decided that section 1056 does not apply to the sale
of a partnership interest, we address respondent's alternative
argument that the basis of the player contracts was incorrectly
computed under subchapter K. In this case, a distribution was
deemed to have occurred to Bowlen and the remaining partner
because of the section 708 constructive termination of the
partnership when Bowlen purchased over a 50-percent partnership
interest. Sec. 708(b)(1)(B); sec. 1.708-1(b)(1)(iv), Income Tax
Regs.
Section 732(d) and the regulations thereunder, with respect
to a liquidating distribution, require a basis adjustment in
- 36 -
accord with section 743(b) prior to a distribution to a partner
who acquired his interest in the absence of a section 754
election, if three conditions exist: (1) The fair market value
of the partnership's property (other than money) exceeds 110
percent of its adjusted basis to the partnership at the time the
partnership interest was acquired, (2) upon liquidation of the
partner's interest in the partnership immediately after
acquisition, an allocation of basis under section 732(c) would
have shifted basis to depreciable, depletable, or amortizable
property from property not subject to these allowances, and (3) a
special basis adjustment under section 743(b) would have changed
the basis to the transferee partner of property actually
distributed. Sec. 1.732-1(d)(4), Income Tax Regs.; see Rudd v.
Commissioner, 79 T.C. 225, 240-246 (1982).
The partnership did not have a section 754 election in
effect for 1984. Up to this point, the parties remain in accord.
Their disagreement goes to the amount of the fair market value of
the player contracts and whether the section 732(d) provisions
applied.
The partnership's accountant determined that the section
732(d) mandatory basis adjustment rules applied, and the player
contract bases were adjusted in accord with section 743(b) prior
to the deemed distribution. The partnership used the section
743(b) adjusted basis, i.e., their purported fair market values,
- 37 -
to allocate basis among the distributed assets and assigned a
basis of $36,121,385 to the player contracts.
Respondent argues that the value of the player contracts at
the time of Bowlen's acquisition of a partnership interest was
$45,695,000, which was the average of the estimates by other NFL
teams. Due to respondent’s premise that the partnership used an
incorrect basis of $36,121,385, respondent argues that section
732(d) did not apply and that the partnership's basis in the
player contracts is $21,288,373 in the absence of the section
743(b) adjustment. Because the partnership had amortized more
than $21,288,373 prior to the years before this Court, no
deduction would be allowable if respondent's argument is
sustained. If, however, we find that the fair market value of
the player contracts ($36,121,385) used by the partnership was
correct, then respondent's argument must fail. As decided above,
respondent bears the burden of proving that the fair market value
of the player contracts was $45,695,000, instead of the
$36,121,385 amount used by the partnership.17
To meet that burden, respondent relies on the $45,695,000
average of the four estimates obtained by Bowlen I as the true
17
Petitioner agrees that a $45,695,000 fair market value
for the player contracts would mean that secs. 732(d) and 743(b)
would not apply resulting in a $21,288,373 basis in player
contracts. Similarly, respondent agrees that a $36,121,385 value
would result in the application of sec. 732(d) and related
sections and that the basis of the contracts would have been
$36,121,385.
- 38 -
fair market value so that the $45,695,000 value would not have
triggered section 732(d).18 Respondent argues that the
partnership's basis would have been $21,288,373 and that prior
year's claimed amortization had already exceed that amount prior
to the years under consideration. Accordingly, under
respondent's argument, the partnership would not be entitled to
any further amortization.
The partnership, in accord with its accountant's analysis,
used the $36,121,385 fair market value for purpose of determining
whether the mandatory basis adjustment rules of section 732(d)
apply. Respondent did not present expert testimony regarding the
value of the player contracts and relies on the simple expediency
of averaging the four estimates used by the partnership in an
attempt to reach a fair market value. The estimates were not
offered to establish the fair market value of the player
contracts. Instead they are a predicate for discussion of the
section 1056 issue and whether it applies to a partnership
transaction.
18
Respondent's argument that sec. 732(d) would not apply is
based on a $45,695,000 value for the player contracts, which in
turn, would, according to respondent, result in a larger basis
being allocated to depreciable and amortizable assets under sec.
732(d) than if a sec. 743(b) basis adjustment was not in effect.
The parties did not debate whether each other's analysis was
correct. In essence they agreed, that if we find the value they
propose to be correct, then the result they propose ensues. We
accept these concessions for purposes of this case.
- 39 -
Our analysis of the four estimates19 shows them to be
cursory and terse. No explanation is provided for the estimate
listed for each player. The four estimates contain huge
differences and inconsistencies when comparing particular
players. For example, John Elway's contract is estimated as high
as $6,350,000 by the Chicago Bears and as low as $4 million by
the Cleveland Browns. With respect to Steve Busick, the Chicago
Bears estimated $225,000 and the Houston Oilers $1,250,000.
Conversely, the Chicago Bears estimated $100,000 for Britt
Freeman and the Houston Oilers $10,000. We cannot tell whether
these differences reflect the needs of those teams for a
particular player's skills or result from some other
consideration or factor.
The accountant for the partnership, after considering the
estimates respondent relies on, reached a fair market value of
$36,121,385. The value used by the partnership is within the
range of estimates of value by the four NFL teams. We also note
that the $36 million figure is a conservative amount. Under
these circumstances, respondent has not carried the burden of
showing that the fair market value of the player contracts was
more than the $36,121,385 used by the partnership or that the
correct fair market value is the $45,695,000 relied on by
respondent to show that section 732(d) would not apply.
19
A summary of the four estimates was received in evidence
and is attached to this opinion as the appendix.
- 40 -
Accordingly, we find that the mandatory basis adjustment of
section 732(d) applies within the context of subchapter K and
that Bowlen I properly computed the basis of the player contracts
in accordance with the partnership provisions and is entitled to
the amortization deduction in controversy.
To reflect the foregoing and due to concessions by the
parties,
Decision will be entered
under Rule 155.
- 41 -
APPENDIX
APPRAISER
(Chicago (Cleveland (New York (Houston
Bears Browns) Giants) Oilers)
NAME VANISI BAILEY YOUNG HERZEG TOTAL AVERAGE
Aguilar, Joe $100,000 $150,000 $100,000 $10,000 $360,000 $90,000
Alexander, Ray 100,000 200,000 0 200,000 500,000 125,000
Banaszak, Chris 100,000 225,000 125,000 10,000 460,000 115,000
Banks, Larry 100,000 200,000 120,000 10,000 430,000 107,500
Barnett, Dean 125,000 200,000 150,000 10,000 485,000 121,250
Barnett, Larry 100,000 200,000 125,000 10,000 435,000 108,750
Bishop, Keith 525,000 225,000 900,000 1,250,000 2,900,000 725,000
Blinka, Stan 275,000 250,000 300,000 10,000 835,000 208,750
Bowyer, Walt 150,000 175,000 400,000 100,000 825,000 206,250
Boyd, Michael 100,000 175,000 125,000 10,000 410,000 102,500
Brewer, Chris 150,000 225,000 400,000 200,000 975,000 243,750
Brunner, Scott 625,000 750,000 900,000 1,000,000 3,275,000 818,750
Brunot, Rick 100,000 200,000 100,000 10,000 410,000 102,500
Bryan, Billy 1,125,000 225,000 1,500,000 800,000 3,650,000 912,500
Buchannan, Mike 100,000 175,000 125,000 10,000 410,000 102,500
Busick, Steve 225,000 250,000 900,000 1,250,000 2,625,000 656,250
Carmody, Steve 100,000 250,000 100,000 10,000 460,000 115,000
Carswell, Ernest 100,000 175,000 100,000 10,000 385,000 96,250
Carter, Rubin 750,000 750,000 1,000,000 300,000 2,800,000 700,000
Chavous, Barney 1,150,000 400,000 1,200,000 500,000 3,250,000 812,500
Coleman, Duane 100,000 150,000 125,000 10,000 385,000 96,250
Collins, Trent 100,000 175,000 100,000 10,000 385,000 96,250
Comeaux, Darren 125,000 175,000 300,000 100,000 700,000 175,000
Cooper, Mark 450,000 750,000 900,000 600,000 2,700,000 675,000
Costello, Rocky 100,000 125,000 125,000 10,000 360,000 90,000
Davis, Billy 100,000 225,000 125,000 10,000 460,000 115,000
Davis, Jeff 100,000 175,000 125,000 10,000 410,000 102,500
Davis, Ricky 100,000 175,000 125,000 10,000 410,000 102,500
De Bourge, Dale 100,000 175,000 100,000 10,000 385,000 96,250
De Rose, Dan 100,000 200,000 100,000 10,000 410,000 102,500
Dennison, Rick 150,000 225,000 500,000 600,000 1,475,000 368,750
Diorio, Jerry 100,000 200,000 100,000 10,000 410,000 102,500
Dixon, Kevin 100,000 200,000 125,000 10,000 435,000 108,750
Dodson, Lance 100,000 200,000 100,000 10,000 410,000 102,500
Dupree, Myron 125,000 250,000 225,000 50,000 650,000 162,500
Egloff, Ron 300,000 275,000 250,000 50,000 875,000 218,750
Elway, John 6,350,000 4,000,000 5,000,000 6,000,000 21,350,000 5,337,500
Felknor, Bret 125,000 175,000 125,000 10,000 435,000 108,750
Fernandez, Jacinto 100,000 175,000 125,000 10,000 410,000 102,500
Fisher, Mike 100,000 150,000 125,000 10,000 385,000 96,250
Foley, Steve 825,000 300,000 1,200,000 1,000,000 3,325,000 831,250
Freeman, Britt 100,000 150,000 125,000 10,000 385,000 96,250
Freeman, Mike 100,000 200,000 150,000 200,000 650,000 162,500
Gaines, Charlie 100,000 200,000 100,000 10,000 410,000 102,500
Garnett, Scott 150,000 250,000 400,000 500,000 1,300,000 325,000
Gearring, Vernon 100,000 150,000 100,000 200,000 550,000 137,500
Gilbert, Freddie 0 0 0 0 0 0
Gradishar, Randy 0 0 0 0 0 0
Graves, Marsharne 100,000 150,000 200,000 10,000 460,000 115,000
Greggs, Mark 100,000 200,000 100,000 10,000 410,000 102,500
Harden, Mike 775,000 250,000 900,000 700,000 2,625,000 656,250
Harris, Weedy 150,000 250,000 250,000 10,000 660,000 165,000
Hawkins, Reco 100,000 125,000 100,000 10,000 335,000 83,750
Hedderly, Russ 100,000 125,000 100,000 10,000 335,000 83,750
Higginbotham, John 100,000 175,000 100,000 10,000 385,000 96,250
Hollingsworth, Shawn 100,000 175,000 150,000 10,000 435,000 108,750
Hood, Winford 150,000 200,000 400,000 500,000 1,250,000 312,500
Howard, Paul 925,000 250,000 900,000 100,000 2,175,000 543,750
Hunley, Ricky 0 0 0 0 0 0
Jackson, Roger 300,000 250,000 300,000 100,000 950,000 237,500
Jackson, Tom 625,000 300,000 1,200,000 200,000 2,325,000 581,250
Jarman, Murray 150,000 200,000 200,000 10,000 560,000 140,000
Jenkins, Bob 100,000 125,000 100,000 10,000 335,000 83,750
Jones, Demetrius 100,000 125,000 120,000 10,000 355,000 88,750
Jones, Rulon 1,475,000 750,000 1,200,000 2,500,000 5,925,000 1,481,250
Joyce, Jim 100,000 125,000 125,000 10,000 360,000 90,000
- 42 -
(Chicago (Cleveland (New York (Houston
Bears Browns) Giants) Oilers)
NAME VANISI BAILEY YOUNG HERZEG TOTAL AVERAGE
Karlis, Rich 700,000 400,000 900,000 600,000 2,600,000 650,000
Kay, Clarence 150,000 250,000 600,000 1,250,000 2,250,000 562,500
Kelley, Greg 100,000 125,000 100,000 10,000 335,000 83,750
Kenneybrew, Carl 100,000 200,000 125,000 10,000 435,000 108,750
Kragen, Greg 100,000 200,000 125,000 200,000 625,000 156,250
Kubiak, Gary 225,000 500,000 600,000 1,000,000 2,325,000 581,250
Lang, Gene 150,000 250,000 200,000 200,000 800,000 200,000
Lanier, Ken 550,000 400,000 900,000 1,000,000 2,850,000 712,500
Lasack, Duane 100,000 125,000 100,000 10,000 335,000 83,750
Leary, Bill 125,000 125,000 100,000 10,000 360,000 90,000
Lilly, Tony 650,000 250,000 700,000 600,000 2,200,000 550,000
Logan, Dave 375,000 200,000 1,200,000 10,000 1,785,000 446,250
Lomeli, Dan 100,000 125,000 100,000 10,000 335,000 83,750
Luck, Mike 100,000 125,000 175,000 10,000 410,000 102,500
Lytle, Rob 0 200,000 300,000 10,000 510,000 127,500
Manor, Brison 275,000 300,000 300,000 100,000 975,000 243,750
Massie, Rick 0 0 0 0 0 0
Mecklenburg, Karl 250,000 200,000 600,000 0 1,050,000 262,500
Micho, Bobby 150,000 200,000 300,000 200,000 850,000 212,500
Moen, Kevin 100,000 175,000 100,000 10,000 385,000 96,250
Morgan, John 100,000 175,000 100,000 10,000 385,000 96,250
Mullahey, Nick 100,000 175,000 100,000 10,000 385,000 96,250
Muriaty, Gene 100,000 200,000 125,000 10,000 435,000 108,750
Myers, Wilbur 175,000 200,000 250,000 10,000 635,000 158,750
Myles, Jesse 175,000 250,000 250,000 200,000 875,000 218,750
Naylor, Rick 100,000 125,000 100,000 10,000 335,000 83,750
Neal, Alan 100,000 200,000 100,000 10,000 410,000 102,500
Niko, Maomao 125,000 200,000 150,000 10,000 485,000 121,250
Norman, Chris 100,000 200,000 175,000 600,000 1,075,000 268,750
O’Brien, Eddie 100,000 200,000 100,000 10,000 410,000 102,500
Osborn, Kelly 100,000 200,000 100,000 10,000 410,000 102,500
Parros, Rick 425,000 300,000 900,000 50,000 1,675,000 418,750
Patterson, Jeff 100,000 200,000 100,000 10,000 410,000 102,500
Poole, Jon 100,000 200,000 100,000 10,000 410,000 102,500
Poole, Nathan 150,000 225,000 200,000 50,000 625,000 156,250
Prestridge, Luke 525,000 400,000 500,000 200,000 1,625,000 406,250
Price, Steve 100,000 175,000 100,000 200,000 575,000 143,750
Raikes, Jeff 125,000 200,000 125,000 10,000 460,000 115,000
Ramson, Eason 225,000 300,000 600,000 10,000 1,135,000 283,750
Reiner, Mike 100,000 175,000 100,000 10,000 385,000 96,250
Robbins, Randy 200,000 300,000 600,000 600,000 1,700,000 425,000
Robinson, Capus 100,000 200,000 100,000 10,000 410,000 102,500
Rogers, Shawn 100,000 200,000 100,000 10,000 410,000 102,500
[illegible] 100,000 200,000 100,000 10,000 410,000 102,500
Russell, Marlin 100,000 200,000 125,000 10,000 435,000 108,750
Ryan, Jim 275,000 200,000 900,000 600,000 1,975,000 493,750
Salazar, Robert 100,000 200,000 125,000 10,000 435,000 108,750
Sampson, Clint 350,000 500,000 600,000 600,000 2,050,000 512,500
Sawyer, John 275,000 300,000 400,000 10,000 985,000 246,250
Scandrett, David 100,000 200,000 100,000 10,000 410,000 102,500
Schafer, Steve 100,000 200,000 125,000 10,000 435,000 108,750
Simmons, Melvin 100,000 200,000 100,000 10,000 410,000 102,500
Simpson, Adrian 100,000 200,000 100,000 10,000 410,000 102,500
Skudneski, David 100,000 200,000 125,000 10,000 435,000 108,750
Small, George 200,000 300,000 175,000 10,000 685,000 171,250
Smith, Aaron 100,000 250,000 300,000 200,000 850,000 212,500
Smith, Alonzo 100,000 200,000 100,000 10,000 410,000 102,500
Smith, Charlie 100,000 200,000 100,000 10,000 410,000 102,500
Smith, Darryl 100,000 125,000 100,000 10,000 335,000 83,750
Smith, Dennis 2,275,000 1,000,000 2,000,000 2,500,000 7,775,000 1,943,750
Smith, John 100,000 200,000 100,000 10,000 410,000 102,500
Smith, Reggie 0 0 0 0 0 0
Stachowski, Rich 100,000 200,000 175,000 10,000 485,000 121,250
Staff, Mike 100,000 200,000 125,000 10,000 435,000 108,750
Stankavage, Scott 100,000 250,000 250,000 10,000 610,000 152,500
Studdard, Dave 550,000 300,000 1,000,000 300,000 2,150,000 537,500
Summers, Don 100,000 125,000 175,000 200,000 600,000 150,000
Sutton, Phil 100,000 200,000 100,000 10,000 410,000 102,500
Swanke, Rob 100,000 250,000 200,000 10,000 560,000 140,000
- 43 -
(Chicago (Cleveland (New York (Houston
Bears Browns) Giants) Oilers)
NAME VANISI BAILEY YOUNG HERZEG TOTAL AVERAGE
100,000 200,000 100,000 10,000 410,000 102,500
Taylor, Joe 150,000 300,000 400,000 10,000 860,000 215,000
Thomas, Zack 100,000 200,000 125,000 10,000 435,000 108,750
Thompson, Dale 100,000 200,000 125,000 10,000 435,000 108,750
Thurson, Tommy 100,000 200,000 125,000 10,000 435,000 108,750
Thurston, Guy 900,000 750,000 1,300,000 700,000 3,650,000 912,500
Townsend, Andre 100,000 200,000 0 10,000 310,000 77,500
Uebel, Ralf 175,000 250,000 300,000 150,000 875,000 218,750
Uecker, Keith 0 100,000 500,000 0 600,000 150,000
Upchurch, Rick 100,000 175,000 100,000 10,000 385,000 96,250
Veals, Dennis 100,000 175,000 125,000 10,000 410,000 102,500
Wade, Michael 100,000 175,000 100,000 10,000 385,000 96,250
Walker, Chuck 100,000 175,000 125,000 10,000 410,000 102,500
Walker, Eddie Ray 100,000 200,000 100,000 10,000 410,000 102,500
Walsh, Eddie 2,050,000 1,000,000 2,000,000 1,500,000 6,550,000 1,637,500
Watson, Steve 100,000 200,000 100,000 10,000 410,000 102,500
Whetstone, Mike 525,000 1,000,000 1,200,000 400,000 3,125,000 781,250
Willhite, Gerald 750,000 250,000 700,000 300,000 2,000,000 500,000
Wilson, Steve 375,000 750,000 1,200,000 400,000 2,725,000 681,250
Winder, Sammy 100,000 150,000 100,000 10,000 360,000 90,000
Wise, Ben 325,000 225,000 600,000 150,000 1,300,000 325,000
Woodard, Kenneth 300,000 175,000 600,000 50,000 1,125,000 281,250
Wright, James 1,425,000 1,000,000 1,500,000 600,000 4,525,000 1,131,250
Wright, Louis 100,000 275,000 100,000 10,000 485,000 121,250
Wristen, John 100,000 150,000 100,000 10,000 360,000 90,000
Young, Barry ___________ ___________ ___________ __________ ___________ ___________
TOTAL 44,325,000 43,450,000 59,215,000 35,790,000 182,780,000 45,695,000