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Buy, Borrow, Die—Defer! (NYT, Evan Drellich)www.nytimes.com/athletic/5153421/2023/12/21/shohei-ohtani-dodgers-contract-deferrals-silicon-valley/

659 sats \ 8 comments \ @denlillaapan 13 Jan Stacker_Sports

I don't really publish in this territory, but to maximally annoy @realBitcoinDog I'll share this one here.

Everyone knows that elite athletes are high earners... and the wealthy are good with the tax planning. So how has the L.A. Dodgers' Shohei Ohtani done his best to avoid the filthy commie treasury of the not-so-great state of California?

Just defer the income.

And apparently, if you take your biiiiig athlete payouts in equal installments (like a future retirement) and live in a low-/no-income tax state, your savings amount to billions. Genius!

Here's the New York Times reporting:

Ohtani this month agreed to play for the Dodgers for a decade at $70 million per season, but from 2024-33, he’ll draw just $2 million per season. Ohtani is deferring $680 million — more than 97 percent of his earnings — until after his 10-year deal with the Dodgers expires, when that money comes back to him in equal annual payments from 2034-43.

...experts say that the structure of the contract appears likely to save Ohtani between $90 and $100 million in state taxes, so long as he lives outside of California when the deferred money is paid out.

So the rich got a new word added to their tested-and-tried "buy, borrow, die" strategy: defer.

The legal system is a marvel!

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39 sats \ 4 replies \ @grayruby 13 Jan

Howdy. Nice to see you around these parts.

@Undisciplined and I briefly talked about this contract on the pod and how the Dodgers are essentially shorting fiat with all the deferrals they using but nice to look at it from the player side as well as a tax avoidance measure.

50 sats \ 3 replies \ @denlillaapan OP 13 Jan

right! Shorting fiat in that they have fixed future outlays ($xx million dollars) but they get the benefits/revenue from it today?

0 sats \ 2 replies \ @grayruby 13 Jan

Yes and it seems they are betting on those future dollars to be worth less compared to what future revenues and salaries will look like when they have to pay them.

It also allows them to continue to field a top tier team and remain one of the best teams in the league which is good for the brand and revenue.

The Dodgers team payroll last season was around 240M. If they had to pay Ohtani 70M it would skyrocket their payroll into the highest tier of luxury tax which would mean they would pay an additional 50% on every dollar spent over 220M which would effectively make their payroll 325M. That might not be palatable even for the big spending Dodgers. In that scenario it is unlikely they would be able to re-sign their other top players and may even have to trade some players with high contracts away in order to reduce payroll. But since they are only paying Ohtani 1M, they can also keep a bunch of other all star players.

They will need to pay Ohtani in the future but they are likely presuming league revenues, salaries and luxury taxes are all higher at that point so it is not such a large portion of salary on one player.

I am not sure what the rules are in baseball but in NFL you can restructure contracts and payout large bonuses to avoid "salary cap hits". They may be able to restructure that contract once the bill comes due and pay a large portion up front to avoid it being too punitive to the team payroll.