I’m of two minds—this is blatant CBT manipulation and should be changed, but also the path to having Altuve, Bregman, and Tucker all on the team long term is now pretty clear.
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I could see Altuve maybe doing something like this, less so Bregman and no chance with Tucker
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For us everyday folks there are very strict rules as to how much of our income we can set aside tax-deferred. For management and apparently for those with special ability, not so much.
Not really. There are no limits (not by the IRS anyway, your company may have them) on deferring salary to a future year. He’s not putting it into a tax-deferred retirement account, he’s delaying payment. One of the risks, and one of the reasons you’re allowed to defer salary this way, is because it’s unsecured, and if the Dodgers go bankrupt and can’t pay him, he’s screwed. They’re not putting it into a secured account on his behalf.
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I thought players were employees (W2), not contractors (1099)
They are. But you can defer salary, as much as your employer will let you.
A more interesting question (to me, anyway) is whether his contract has any language that moves him up in the line of creditors in the event of a bankruptcy.
I don’t know how that would work. He’s an unsecured creditor, but I don’t know where he would fit into the claims queue. Unleash the lawyers!!
I have to admit that it took a day for the shock value of the $700 million number to subside to see this for what it really is. This is a 10-year, $460 million contract. There really isn’t a competitive advantage gained in this deal, player and team have simply agreed to a valuation on payments to be made 10-20 years from now. MLB is using accepted accounting practices to value those payment in today’s dollars and is applying that amount to the CBT. Shohei is giving up the opportunity to make a greater than 5% return on his money over the 20 year term of the contract - which I think is significant because people with that kind of wealth and fame tend to get access to better opportunities than I do in my 401k.
I don’t really see any reason why other players would follow this pattern, I can’t imagine that their financial advisors would recommend it.
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Not necessarily you, but I’ve been reading lots of these types of comments about this deal “He’s getting fleeced”…“he must not have a financial advisor”…“he’s not considering the time value of money”…
There is no way on earth he gets $700 million without that hefty deferral and a significant interest built into the contract total. And it’s laughable to think he and his agent just fell off the turnip truck. This deal was carefully crafted by one of the smartest and shrewdest agents in the business.
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To put it another way, if the biggest risk to getting $700M is the LA Dodgers going bankrupt then you’re probably gonna be just fine.
His agent gets commission on $700M
MLBPA gets to say $700M is the new standard for free agency
Ohtani gets his money at a time when his endorsements may start to dwindle
Dodgers pay roughly the CBT level people expected for his deal initially, and save the cash for hauling in other players in the next ten years
MLB gets to show how financially healthy they are, and get tons of free coverage during their quietest time of the year.
Winners all around.
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Which, I think, one could then argue that this deal is actually worth less than $460 million dollars. 460 is the accounting value, but the negotiated value would be based on the present value as determined by his financial advisors (and conversely by the Dodgers).
I haven’t done the NPV math, but yeah, it’s certainly not the equivalent of $700MM today.
Winner, winner. Though to be clear, his agent has to wait for the commission on the $680 million deferred too. The agent doesn’t get the fees upfront, so he’s playing the same NPV value game.
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I am still trying to figure out how Ohtani is going to squeeze by on about $100,000 per month (after taxes) for the next twenty years. Belt tightening ahead!
He’ll need to cut back on the lattes and take out, maybe he’d be able to afford a house then.
I know this is a joke but I think he’ll be just fine. The additional endorsement value created by his move to the Dodgers is immense. He (and his agent) will make mountains of $$ in CA, nationally and abroad with the joint Ohtani/Dodgers brand association. Jordan-esque type of $$, I’d think.
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He’ll make a few endorsements in Japan and southern California. He’ll be okay.
It’s been widely reported that he was already making $40-50 million a year off endorsements.
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