Attention All Coaches: Belichick's Cheating Is A Business Expense

According to the WSJ Law Blog, the common consensus is that Patriots coach Bill Belichick will be able to deduct his $500,000 cheating fine as an “ordinary and necessary business expense.” Hooray?

From the TaxProf Blog, where the question first arose:

If Bill were my client, I would advise him to claim the fine as a deduction subject to the 2% miscellaneous itemized deduction rules (under 162). A few considerations:

1. If it is ordinary and necessary, he may negotiate to turn the fine into his employer (the Pats) as an expense reimbursement under an accountable plan. I think Kraft would tell him to get out of his office, though.
2. It’s been reported Bill has an annual salary of about $5 million, so let’s use that as a rough approximation of AGI. Assuming no other miscellaneous itemized deductions subject to limit, that shaves $100,000 off his deduction right there, leaving him with $400,000.
3. The Pease phaseout will get him, as well. Assuming $5 million of AGI and $1 million of itemized deductions (about standard), the Pease phaseout will reduce his itemized deductions by $145,308. The pro-rated share (40%) of this assigned to the remainder of the fine is $58,123. That leaves him with $341,877 to deduct.
4. Assuming he is in the 35% bracket, the federal tax subsidy on this will be $119,657. The IRS will subsidize 24% of the Belichick fine.

For a nice roundup of tax professor’s opinions, check out this entry on the TaxProf blog. Too funny. We think we hear Mangini crying. Can Bill deduct the spy camera, too?


Can Patriots Coach Belichick Deduct His $500,000 Fine?
[TaxProf Blog via WSJ Law Blog]

Comments

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  1. blue_duck says:

    Must be nice to be rich…

  2. nightshadowon says:

    @blue_duck: That’s what I was thinking…. and the richer you are the less taxes you have to pay.

  3. Frank Grimes says:

    HaHaHa…and the Jet’s still blow.

  4. Cowboys_fan says:

    I can’t say for sure but I doubt it would even go that far. I know in the NHL for example, if a fined player does not repeat the offence within 1 year, they get 90% of the fine back. I can only imagine similiar type rules from the NFLPA.

  5. MyCokesBiggerThanYours says:

    “the richer you are the less taxes you have to pay.”

    This idea is completely ignorant of reality. The converse is true. Go see for yourself at irs.gov

    The top 10% of wage earners pay more than 50% of all income taxes collected. Additionally, the bottom 30% of wage earners pay net-zero income taxes. And if you are really poor you get refunded money you never paid in the first place!

    This is a legit. business expenses because these fines are not government fines, they are private penalties of a private org. This is no different from paying a membership fee to the chamber of commerce. Which is a legit. expense.

    …this is what irks me about many comments and articles on this site. They are absent of any knowledge of business, askew from reality, and come across as knee-jerk hippie reaction.

  6. blue_duck says:

    *just wondering the about the actual definition of the “knee-jerk hippie”*

  7. alk509 says:

    “Can Bill deduct the spy camera, too?”

    He’ll probably get the Pats to reimburse him for that one, as it should be (if they didn’t alread pay for it in the first place). In any event, what exactly is wrong with deducting business expenses from your income tax?

  8. alk509 says:

    @blue_duck:

    Must be nice to be rich…”

    Actually, everyone can and should deduct business expenses from their income tax, not just rich folk. I’m not rich, yet I do it every year. My tax bill would almost double if I personally absorbed my business expenses!

  9. TonyTriple says:

    Dearest Football fans, everything that we thought the game stood for:

    athleticism (killed by rampant doping)

    sportsmanship (killed by rampant lousy attitudes)

    fair play (killed by rampant cheating)

    is all a lie. This is like finding out pro wrestling is fake all over again. From what I understand, Belichick was only doing what other coaches have been doing/are doing now. This is a sad state of affairs…

  10. mac-phisto says:

    @TonyTriple: this is news? i stopped watching pro football when i went to redskins-giants game in the 90’s & almost fell asleep.

    college, baby. go lions!

  11. CoffeeAddict says:

    GO CFL!!! Something like that would never go here.

  12. Charles Duffy says:

    @MyCokesBiggerThanYours: It’s a very legitimate claim; as a percentage of income, the ultra-rich do pay far less than the rest of us — if for no other reason, because so much of their income is taxed at capital gains rates. I have a friend who works overseas, makes exceedingly good money, and pays very little of it in taxes to either country — and there are other, much more publicly well-documented cases such as that of Warren Buffet.

  13. Charles Duffy says:

    …not that I think that low or nonexistent corporate and/or capitol gains taxes are inherently a bad thing. Taxes should be used to encourage desirable behavior. We want to encourage people to generate value and invest what they earn in the production of more value (and putting money in a bank, which then lends it out, does that) — so why do we tax income (corporate or personal) rather than spending?

    I’m very much a proponent of the FairTax: Get rid of federal income taxes altogether (we want people to generate value; why have tax policies which discourage that behavior?), get rid of corporate taxes (which are eventually passed down to individuals anyhow), get rid of all the loopholes, and implement a universal, flat sales tax with a monthly refund based on cost-of-living. No more need for individuals to do their own taxes — it’s all implemented by companies selling goods and services — and the cost-of-living-based refund makes the tax effectively progressive (as its amount isn’t based on income or lifestyle-based expense levels, the refund is larger as a percentage of income for those who need it most).

    And as an extra bonus, it makes April 15th just another day.

  14. swalve says:

    @Charles Duffy: And how. It’s amazing the disconnect in people’s minds who sometimes simultaneously complain that “corporations” pay too little in taxes and charge too much for their products.