Posted on 12/18/2023 6:22:06 PM PST by Oldeconomybuyer
Baseball superstar Shohei Ohtani “will collect $2 million in each of the next 10 years” from the LA Dodgers, notes Reason’s Eric Boehm, with the other $68 million of Ohtani’s yearly salary being “deferred for a decade.”
“The Dodgers will owe it to him in annual installments starting in 2034.” Why? “California has the country’s highest state income tax rates,” so “Ohtani could save as much as $98 million” if “he relocates out of California by 2034.”
And the Dodgers might also reduce their own tax burden” by dodging the “MLB’s so-called ‘luxury tax’ ” that limits “how much money richer clubs spend on players.” Proving “teams will find new ways to sign expensive ballplayers,” and “wealthy people will find ways to avoid earning money in California.”
(Excerpt) Read more at nypost.com ...
And the Dodgers might also reduce their own tax burden” by dodging the “MLB’s so-called ‘luxury tax’ ” that limits “how much money richer clubs spend on players.” Proving “teams will find new ways to sign expensive ballplayers,”
That’s the difference between the MLB and the NFL as well as the NHL which have hard salary caps. You cannot offer a contract in the NFL or NHL which has future benefits in them that cannot be counted against the salary cap when the player is no longer with the team.
Aren’t taxes due in the year of earnings? IOW, would he not owe the same amount of taxes in each of the next 10 years, regardless of deferment to 2034 and later? And, wouldn’t he still own the California taxes regardless of where ho moves to after his playing days?
Good for him, at least for now at any rate. But Ca. will find some way to make sure they get their unfair share.
$700 million to shake a stick at a ball for some years?
Endtimes! LOL.
That’s my take too. Taxes may never be as “low” as they are now with hyperinflation and exploding debt service costs.
If they pay him in 2034, he earned it in 2034.
Maybe, but he’s been making something like $50 million/yr endorsements for Angels, and likely will double that as a Dodger. That $680 mil deferred means he can afford to gamble on future taxes and inflation.
Earnings are the year you're paid.
Study up on the “doctrine of constructive receipt”.
I think this guy’s agent, and lawyer and accountant know how to structure the deal to DEFER the income and the taxes.
It is downright amazing how cleverly some of the deals can be.
For luxury tax purposes, the contract is valued at $460 million.
He’ll make at least that much in endorsements over 10 years - though if done right he can minimize his taxes on that endorsement money too. The deferred money will earn interest held in escrow. It’s like annuity for him. He’ll make plenty now and pay taxes on some of that now. Then he’ll move and collect a lot more without tax for another 10 years, when his endorsement income will start to wane.
I wonder if that current SCOTUS case will have an adverse effect on this scheme
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