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.