TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, September 18, 2004

Tax Consequences of Misdirected Direct Deposit

Saturday, September 18, 2004

Great story in Friday's Philadelphia Inquirer for tax profs looking for classroom fodder:

Mound of trouble. A payroll mix-up by the Tribune Company, which owns a chain of newspapers and the Chicago Cubs, has highlighted the outrageous salaries athletes get compared with those of working stiffs. It also spurred a lawsuit and sent sportswriters into pun-making contortions.

A guy named Mark Guthrie, who delivered papers for the Tribune-owned Hartford Courant, received direct deposits of $301,000 that were intended for the Mark Guthrie who, uh, "delivered pitches" for the Cubs last year. That cash total was just three baseball-player payments. The working-stiff Guthrie gave back most but not all of the money, concerned about his tax liability.

Questions for students: Did the deliveryman Mark Guthrie have income upon receipt of the 300k? Is he like someone who finds 300k on the street? Why did he give back most, but not all, of the money if he was concerned about his tax liability? (Thanks to the ever-vigiliant Jim Maule (Villanova) for the tip.)

Sports Illustrated update:

Nearly a year after the troubled transaction, $26,000 of the athlete's pay remains in the deliveryman's account, and the Cubs want it returned....

The Cubs caught the mistake five weeks after the fact. The last of three payments, totaling $301,102.50, was made to Guthrie's bank account on Oct. 30. The Cubs had taken out $275,000 when Guthrie had his account frozen. The team sued Guthrie, the paper carrier, in February. Last month, the Cubs filed legal documents offering to drop the lawsuit if Guthrie handed over the rest of the money. "We have no desire to embarrass Mr. Guthrie or bring undue attention to his actions -- we just want the money back," the company's Hartford-based lawyer Paul Guggina said.

Guthrie... said the matter is more complicated than that. "I need them to open the books to me and show me I don't have any tax liabilities," he said. "It's mind-boggling. They never should have made the mistake to begin with."

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Tracked on Sep 18, 2004 6:01:17 PM


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