In the case of the Dodger owner, he just borrows against the team's ticket revenue and other assets. In one year, according to divorce filings, the McCourts spent $45 million, but since that money is not coming from actual income - just borrowing - it's not subject to any federal tax. They're really shameless, those two. Tax maven David Cay Johnston uses Frank and Jamie as an example of how the well-off are often able to bypass the IRS ( McCourt's stiffing of the government got some attention during the divorce trial). From the Association of Alternative Newsweeklies
John Paulson, the most successful hedge fund manager of all, bet against the mortgage market one year and then bet with Glenn Beck in the gold market the next. Paulson made himself $9 billion in fees in just two years. His current tax bill on that $9 billion? Zero. Congress lets hedge fund managers earn all they can now and pay their taxes years from now.
Lots of other people live tax-free, too. I have Donald Trump's tax records for four years early in his career. He paid no taxes for two of those years. Big real-estate investors enjoy tax-free living under a 1993 law President Clinton signed. It lets "professional" real-estate investors use paper losses like depreciation on their buildings against any cash income, even if they end up with negative incomes like Trump.
This is why serious reform of the tax laws is so daunting (some would say impossible). Each loophole has a formidable constituency that will hire lawyers and lobbyists and spend millions of dollars to either hold onto their giveaway or come up with another way of skirting taxes.