Retief Goosen Birdies at FedEx St. Jude Classic, Bogeys in Tax Court

Two-time U.S. Open champion Retief Goosen had a mixed day yesterday: he shot 2-under par, good for 8th place in the first round of the FedEx St. Jude Classic, but lost crucial parts of his Tax Court case, Retief Goosen v. Commissioner, 136 T.C. No. 27 (June 9, 2011):

P, a professional golfer, entered into endorsement agreements with sponsors Acushnet, TaylorMade, Izod, Upper Deck, Electronic Arts and Rolex. ... P characterized the endorsement fees and bonuses from Acushnet, TaylorMade and Izod as 50% personal services income and 50% royalty income on his nonresident Federal income tax returns for 2002 and 2003. P characterized the endorsement fees from Upper Deck, Electronic Arts and Rolex as 100% royalty income. P reported approximately 7% of the total endorsement income as U.S.-source income. R determined that P should have characterized the endorsement fees and bonuses from Acushnet, TaylorMade and Izod as 100% personal services income. R also reallocated a larger percentage of P’s endorsement fees as U.S.-source income.

1. The endorsement fees and bonuses P received from Acushnet, TaylorMade and Izod are allocated 50% to personal services income and 50% to royalty income.
2. [T]he royalty income P received from Acushnet, TaylorMade and Izod is 50% U.S.- source income effectively connected with a U.S. trade or business. The royalty income P received from Rolex is 50% percent U.S.-source income not effectively connected with a U.S. trade or business. The royalty income P received from Upper Deck is 92% U.S.- source income not effectively connected with a U.S. trade or business. The royalty P received from Electronic Arts is 70% U.S.-source income not effectively connected with a U.S. trade or business.
3. P does not benefit from any provision under the 1975 or the 2001 U.S.-U.K. income tax treaty.

• Bloomberg, Two-Time U.S. Open Champ Goosen Understated Income, U.S. Tax Court Says
• Tax Update Blog, Golfer Goosen joins the U.S. Tax Tour

Hat Tip: Bob Kamman.)

Update: Bloomberg, Golfer Goosen’s Tax Court Case Tests Principle That Image Is Everything