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Wednesday, April 15, 2009

Money for nothing, get your coach for free

So, Isiah Thomas is going to coach for free in his first year at FIU--upon finding out about the substantial budget cuts and firings, Thomas agreed to donate his first-year salary (the amount of which was not reported in any story I have seen(update: In total, he has a 5-year, $ 1.2 million contract, or about $ 250,000 per year) ) back to the university. This is a truly impressive and classy move for which I give Thomas a ton of credit (although I wonder what is National Association of Basketball Coaches brethren will think). It also is a great PR move; it might assuage faculty who might have objected to the hiring and its cost and it might keep some national media attention on the program next year to watch the novelty of Thomas not only coaching in college, but coaching for free.

I do not think this changes most of what I wrote this morning; I admit to remaining skeptical--about whether he can create a successful basketball program, about whether it is going to be expensive at a time the university cannot afford it (he will be getting paid beginning in his second year, although 3-7% budget cuts still are planned throughout the university), and about whether it will cause off-court problems. But it certainly is off to an interesting start.

Anyone out there want to talk about the tax implications of this?

Posted by Howard Wasserman on April 15, 2009 at 05:44 PM in Howard Wasserman, Sports | Permalink


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Ah. I didn't catch that. A more interesting problem, then. Donating his salary is not a good move -- his charitable deduction will be limited to 50% of his charitable contribution base (which is AGI in most cases), assuming FIU is a public charity. So unless Coach Thomas has cash on hand to pay the taxes on the remaining 50%, it seems like a tax foolish move to me.

Posted by: Bridget Crawford | Apr 16, 2009 8:38:53 PM

But is he actually rendering services without compensation? The news stories says he is "donating" his salary--which I read as he is getting paid, then is making a charitable donation back to FIU. Or am I misunderstanding that completely?

Posted by: Howard Wasserman | Apr 16, 2009 8:00:28 AM

For whatever it's worth, generally speaking, rendering services without compensation does not give rise to a taxable gift. Could the IRS try to characterize this as "delayed comp"? Sure, but my guess is that this would not be a successful argument.

Posted by: Bridget Crawford | Apr 15, 2009 9:54:14 PM

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