November 27, 2009
Michigan Coach Rodriguez and the Tax Man
When Richard Rodriguez moved from West Virginia University to the University of Michigan. Coach Rodriguez had a contract with his former employer that required him to pay $4 million dollars to West Virginia if he left for another coaching position. After a suit was filed, it was reported that the parties agreed that the $4 million dollars will be paid to West Virginia, of which Rodriguez will pay $1.5 million dollars in installments, and the University of Michigan (his new employer) will pay the remaining $2.5 million. How tax law applies to that buyout and whether Coach Rodriguez will incur federal income tax liability because of Michigan’s payment of $2.5 million are interesting questions. Simply put, will Michigan’s payment of 62.5 percent of the buyout obligation cause the taxman to cometh to Coach Rodriguez?
We conclude that a payment of a buyout fee to terminate an employment contract is a deductible expense, and that the employee does not incur income tax liability when the new employer pays all or part of his buyout obligation.
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Sonds like COD income to me babba-louie.
Posted by: mark vogel | Nov 27, 2009 9:11:35 AM
where's the canceled debt? the obligation was fully paid, just by someone else.
Posted by: andy | Nov 27, 2009 4:50:07 PM
This may not be a problem for long, as they are likely to fire him.
Posted by: mike livingston | Nov 27, 2009 5:34:26 PM