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Monday, September 17, 2007

More on Deductibility of Patriots Coach Belichick's $500,000 Fine

On Friday, I blogged the results of a question posed on the TaxProf Email Discussion Group:  can New England Patriots coach Bill Belichick deduct the $500,000 fine levied by the NFL for videotape spying in the Pats' opening game against the New York Jets?  Twelve Tax Profs used over 10,500 words to supply the answer:  yes. 

Today, I share the practitioner's perspective from Ryan Ellis, who is also a tax blogger at Tax Info Blog:

If Bill were my client, I would advise him to claim the fine as a deduction subject to the 2% miscellaneous itemized deduction rules (under 162). A few considerations:

    1. If it is ordinary and necessary, he may negotiate to turn the fine into his employer (the Pats) as an expense reimbursement under an accountable plan. I think Kraft would tell him to get out of his office, though.
    2. It's been reported Bill has an annual salary of about $5 million, so let's use that as a rough approximation of AGI. Assuming no other miscellaneous itemized deductions subject to limit, that shaves $100,000 off his deduction right there, leaving him with $400,000.
    3. The Pease phaseout will get him, as well. Assuming $5 million of AGI and $1 million of itemized deductions (about standard), the Pease phaseout will reduce his itemized deductions by $145,308. The pro-rated share (40%) of this assigned to the remainder of the fine is $58,123. That leaves him with $341,877 to deduct.
    4. Assuming he is in the 35% bracket, the federal tax subsidy on this will be $119,657. The IRS will subsidize 24% of the Belichick fine.

http://taxprof.typepad.com/taxprof_blog/2007/09/more-on-deducti.html

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Listed below are links to weblogs that reference More on Deductibility of Patriots Coach Belichick's $500,000 Fine:

» Attention All Coaches: Belichick's Cheating Is A Business Expense from Consumerist
According to the WSJ Law Blog, the common consensus is that Patriots coach Bill Belichick will be able to deduct his $500,000 cheating fine as an "ordinary and necessary business expense." Hooray? From the TaxProf Blog, where the question first... [Read More]

Tracked on Sep 18, 2007 1:56:32 PM

» Are you ready for some tax-deductible football fines? from Don't Mess With Taxes
It looks like case closed on the New England Patriots' illegal videotaping of the New York Jets' defensive coaches signals in the teams' Sept. 9 season opener. The Patriots won 38-14. Pats Coach Bill Belichick was fined $500,000 and the Patriots $250,0... [Read More]

Tracked on Sep 21, 2007 12:34:38 PM

Comments

What if he never receives the $500K, never exercises dominion over it,a nd the Pats simply doc his check for it? Is it income?

Posted by: William | Sep 17, 2007 6:39:46 PM