Shohei Ohtani makes at least 50m USD/year before 2028
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It counts if he signs a contract for this amount, either a longer contract annualized or per year

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Hmm. Does the IRS buy this plan? I cannot imagine if my company structured this deal:

  • nominally I'm getting paid 100k/year

  • but for every year I work, I gain a bond paying out 10k/year which lasts 10 years & principal

  • and I magically don't pay any taxes upon receipt of the bond, but instead only pay for my received income

That doesn't seem like something the IRS would ever allow.

Do we know if Ohtani is also attempting to tell the IRS the income is deferred, too? If so, that would lead me to accept that it's truly <50m/year. But, if the IRS is not buying it, even if MLB is, well, It seems to me reasonable to go with the IRS over anyone else.

predicts NO

@Ernie It’s particularly relevant for state taxes because he might not have to pay California taxes on the bulk of the contract if he moves out after the 10 years. That seems to be Ohtani’s plan and I imagine his lawyers are reasonably confident it will work, but I’m not sure how to resolve that for the market outside of waiting for a potential legal challenge.

https://www.forbes.com/sites/robertwood/2023/12/14/ohtanis-700m-la-dodgers-contract-avoids-144-california-tax/amp/

@ScottHuston that seems INSANE knowing how aggressive CA's tax group is.

You're telling me he'll work in CA and he's the best baseball player in the world by a mile, but get paid only 2m/year, pay taxes to CA on that, then leave, then just magically get paid like 680m suddenly by a CA entity, and not pay taxes???? HMMMMMMMMMM that seems mega mega SUS

If that were possible, every SV company could do amazing things - just write "we'll escrow it, and pay you when you move out of CA" into everyone's contracts optionally. Probably 50% of software engineers would take this deal and defer the money (or have it sit somewhere earning money in escrow). Then when you move out, bam instant retroactive 13.3% tax cut.

Really, really, really hard to believe this will happen that way barring extreme state level corruption due to baseball's high status or other BS.

predicts NO

@Ernie Yeah, I definitely see your point. I can imagine this being the kind of thing that is allowed once and the laws are changed at that point. Even if he is forced to pay taxes on the whole value of the compensation for each year it would likely be less than $50 million depending on the interest rates they use. Happy to let this sit for now and see if there are any legal challenges that give more clarity though

@ScottHuston yeah we need a market for this, working on it

I'm 90% no way in hell CA lets him do this

And the Dodgers are resident in CA, lol, yeah good luck guys

If he gets away with it it's also the most massive injustice I've ever seen in the world cause they charge me 13%, to charge this guy basically 0% state tax, who makes.... 1000x as much money as me, wtf. Put any politician who agrees with this in jail for corruption

predicts NO

So if this is correct (and I think it makes sense to wait until the Dodgers confirm the contract) then both the actual amount he is paid each year and the value of the total compensation for each year before 2028 will be <$50 million

https://x.com/jonbecker_/status/1734344481850421703?s=46

predicts NO

@ScottHuston @Ernie I believe this can be resolved now

Can you specify how you consider deferred payments?

This can resolve YES

@KevinBurke Disagree, reports are that a majority of the contract is deferred and that his annual salary for tax purposes “is likelier to wind up in the $40-50 million-a-year range” https://x.com/jeffpassan/status/1733617544471216149?s=46

predicts YES

@ScottHuston I don't see how this makes sense at all. It's 700m. And 10 years of work. If he is getting paid $700m for 10 years of work, that is $70m per year of work. When the money arrives is kinda moot and is just accounting gimmicks to get past the luxury tax.

predicts NO

@Domer When the money is paid very much impacts the net present value of the compensation for each year

predicts NO

@Domer If I offered to pay you $100 for something and then said I would pay you the $100 in 30 years I imagine you would view that quite differently