It seems like famous athletes are winning something all time. These men and women are often already extremely wealthy, yet they often win prizes for their achievements beyond their salaries. Rest assured there are tax consequences for them.
Did you watch this year’s Super Bowl? It had one of the most thrilling and surprising endings ever.
Seattle had the ball with a few seconds left and needed only to run the ball a couple of yards to enter the end zone, win the game, and make history. Despite having one of the best running backs in football, Seattle chose to pass in a much criticized play.
The result of the play was an interception by a “Cinderella story” defensive back and a victory for the New England Patriots.
Patriots quarterback, Tom Brady, was awarded the MVP trophy for the game. Along with the honor, Brady won a new truck. It turns out, however, that Brady will have to pay income and gift tax on the truck.
This tale is told in a recent Forbes article titled “IRS Is Coming After Tom Brady’s Super Bowl MVP Truck.”
The truck is considered a taxable prize, thus Brady has to pay income tax on it. Fair enough.
Yet, Brady has also stated that he is going to give the truck to teammate Malcom Butler who made the interception to seal the victory.
Because the truck is worth more than the yearly individual gift tax exemption (i.e., $14,000), Brady will have to also pay the gift tax on the truck if he follows through with his announced intentions. Butler, however, will not have to pay tax on the truck as there are no gift tax consequences for the recipients of gifts.
Fortunately, Brady will be able to lessen the gift tax bite if he and his supermodel wife engage in “gift splitting” to permit her individual gift tax exemption to be applied against the value of the gift.
Before making any sizeable gifts, be sure to consult with an experienced estate planning attorney.
Please contact our office today at 239-225-7911 to schedule an appointment with Barbara M. Pizzolato if you are interested in protecting your legacy and need to create or update your estate plan. You may also wish to attend one of our free seminars.
Reference: Forbes (February 4, 2015) “IRS Is Coming After Tom Brady’s Super Bowl MVP Truck”