In December, the world learned that baseball superstar Shohei Ohtani signed a 10-year, $700 million contract with the Los Angeles Dodgers. It is the largest contract in sports history, eclipsing Lionel Messi’s $673 million contract with FC Barcelona.
Just like anybody who comes into a ton of money, the saying “More money, more problems” will always remain true.
Ohtani’s record-setting contract is very complicated as he will not be paid a straight $70 million per year for 10 years.
Ohtani and the Dodgers have agreed to massive deferrals on a scale not seen before in Major League Baseball as the superstar agreed to defer all but $2 million of his annual salary — $68 million of his $70 million per year — until after the completion of the contract. The deferred money is to be paid out without interest from 2034 to 2043.
He will have money paid to him long after he hangs up his cleats. It actually brings the true value of the contract down while allowing the Dodgers to keep more funds to build around him now, and possibly get him tax relief.
Speaking of taxes, it was back in January when questions were first posed about the tax implications of his unique deal.
The California State Controller released a statement on the contract acknowledging that he could, “potentially return to Japan and escape payment of California state income taxes on the deferred amount,” according to SCO.com.
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The Controller used Ohtani’s contract as an example to state that it exposed an imbalance in the tax law around the unlimited income deferral for wealthy taxpayers.
Also Read: Social Media Uncovers Evidence Exposing Shohei Ohtani For Throwing Games As Part Of Betting Scandal
The Los Angeles Dodgers interpreter for Shohei Ohtani was fired last Wednesday after questions surrounding at least $4.5 million in wire transfers sent from Ohtani’s bank account to a bookmaking operation.
Mizuhara told ESPN that he asked Ohtani last year to pay off his gambling debt, which multiple sources said had ballooned to at least $4.5 million. hat presents another problem.
Depending on what is uncovered from the MLB investigation, this could trigger a gift tax for Ohtani and also be considered gross income for Mizuhara whether he stole the funds or not.
The federal tax law stipulates that “all income from whatever source derived,” is considered gross income unless excluded by law. If you are unaware, the IRS still wants criminals to report money that they made from criminal activities on their tax returns.
A gift likely will not trigger a tax for Mizuhara, but the donor, Shohei Ohtani, may be responsible for gift tax, according to Publication 559 from the IRS website.
Basically, it does not matter how Ohtani and Mizuhara define the exchange, the IRS will be interested to know the specific facts and circumstances of the funds exchanged in order to decide how it should be treated for tax purposes.
Shohei Ohtani Will Discuss Gambling Scandal This Week
Los Angeles Dodgers two-way star Shohei Ohtani will speak with the media on Monday for the first time since Major League Baseball opened an investigation into allegations that his longtime interpreter Ippei Mizuhara placed illegal bets.
Ohtani will reportedly speak sometime before the Dodgers play a spring training game against the Angels.
