(New throughout, adds source close to situation confirming reports)
By Alex Dobuzinskis and Eric Kelsey
LOS ANGELES, May 23 (Reuters) - Los Angeles Clippers owner Donald Sterling, banned from the NBA for racist remarks, has handed controlling interest in his team to his wife, the co-owner, and she is negotiating with the league to sell the club, a source with knowledge of the situation said on Friday.
National Basketball Association Commissioner Adam Silver said this week he would prefer to let the Sterlings sell the team "on a reasonable timetable" rather than proceed with trying to forcibly terminate their ownership.
Donald Sterling, controlling owner of the Clippers for 33 years, came under fire four weeks ago when TMZ.com posted an audio recording of him berating a female friend for publicly associating with black people, including NBA great Earvin "Magic" Johnson.
His comments sparked widespread outrage from fans and NBA players and led several commercial sponsors to sever ties with the team.
In response, Silver declared Sterling banned from the NBA for life and called on the 29 other team owners who make up the NBA Board of Governors to force a sale of the Clippers, an unprecedented move requiring a three-fourths majority vote.
Sterling has said through a lawyer that he would challenge any such effort in court. His estranged wife and longtime business partner, Shelly Sterling, who owns a 50-percent stake in the team through a family trust, has likewise said she would take legal action to defend her interest in the club.
The league on Monday initiated formal steps to strip Donald Sterling of his franchise, officially charging that his conduct so seriously damaged the NBA that it was grounds for expelling him as an owner under the NBA's constitution and bylaws.
But the next day Silver signaled his willingness to reach a deal with Sterling to avert a confrontation, noting that for the time being, the Clippers were still the Sterlings' to sell.
A source familiar with the circumstances told Reuters that Donald Sterling has since ceded controlling interest in the team to his wife for purposes of selling the Clippers on her terms, and she has begun quietly negotiating with the NBA to do just that, as first reported by TMZ.com.
As described by the source, the arrangement avoids protracted litigation and allows ownership of the team to be transferred on a voluntary basis rather than by a league-enforced sale.
"And obviously, it's subject to the terms and conditions of the NBA," said the source, who spoke on condition of anonymity.
Attorneys for Donald Sterling and his wife each declined comment. The NBA did not directly address any change in controlling ownership.
"We continue to follow the process set forth in the NBA constitution regarding termination of the current ownership interests in the Los Angeles Clippers, and are proceeding toward a hearing on this matter on June 3," NBA spokesman Mike Bass said in a statement. (Additional reporting by Eric Kelsey; Editing by Gunna Dickson)
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