Blue Jays Discussion: Off-season discussion: Two signings. Rinse, Repeat add 1.

[tmlms13]

that $680m is also tax deferred meaning he won't be paying California taxes on it

Same theory as why we give Matthews all the money in July when he's in Arizona instead of during the year.

 

[WillNy29]

I wonder if the California tax man has legal grounds to go after him for this tax dodge.

none; Clayton Kershaw's entire salary is paid as bonuses during offseason (his residence is Texas with 0 income tax). This is common tax planning for the rich.

I always find it funny that everyone here complains about the Stars, Panthers, Lightning etc having some kind of tax benefits lol. Only benefit is its easier on the tax accountants in those states but good tax accountants will take care of it.

Same theory as why we give Matthews all the money in July when he's in Arizona instead of during the year.

yeah he only gets minuscule salary during the year and has it deferred to the offseason when his residency is Arizona. Mind you Canadian residency laws are a little different than the states but still a good tax accountant will make most taxes for these guys vanish.

Source: am CPA and have some experience in both taxation and audit

 

[Puckstuff]

it's also interest deferred.

So the the $680,000,000 he will be getting in 10 years when he's out of the country will be earning interest?

Did I get that right? Wild if that's true.

 

[phillipmike]

Yeah right. Just saying this so he or the Dodgers don’t look bad. But it won’t work, people aren’t stupid.

Or it maybe it’s true and he mentioned it in negotiations but he never had any intention to sign with anyone but LA.

 

[kb]

So the the $680,000,000 he will be getting in 10 years when he's out of the country will be earning interest?

Did I get that right? Wild if that's true.

For the Dodgers, yes.

 

[Puckstuff]

For the Dodgers, yes.

So what about for Ohtani?

If the inflation rate is 2 % for 10 years or 20 % inflation over 10 years, the money will be worth 20 % less or he would receive 80 cents on the dollar.

Or will Ohtani receive the money in inflation adjusted terms by having his money earn interest in the bank?

 

[Puckstuff]

From my understanding, Ohtani would receive the 680 million after 10 years, with no interest. So the money he will be receiving will be worth way less when he receives it.

It seems like the Dodgers win massively with this deal structure. Dream scenario for the Dodgers.

Ohtani will still receive a lot of money so he sort of wins.

If Ohtani can get paid while he's out of the country in 2034, he will avoid major tax penalties. But I imagine the California left wing government would find a way to collect on their share on tax out of this by the time it's all said and done.

 

[Eternal Leaf]

* $742 million in total MLB earnings
* $20 million in Japanese baseball earnings (roughly)
* $250 million in endorsements (roughly over his MLB career)

Ohtani will have earned approximately $1,012,000,000 (before tax) by 2043.

Geez.

Plus his endorsements will never stop in Japan for the rest of his life since he's a living legend for them.

You add investments and interest on a good chunk of his money and this man will have obscene wealth for an athlete in 20 years.

 

[Puckstuff]

* $742 million in total MLB earnings
* $20 million in Japanese baseball earnings (roughly)
* $250 million in endorsements (roughly over his MLB career)

Ohtani will have earned approximately $1,012,000,000 (before tax) by 2043.

Geez.

Plus his endorsements will never stop in Japan for the rest of his life since he's a living legend for them.

You add investments and interest on a good chunk of his money and this man will have obscene wealth for an athlete in 20 years.

I would be interested to know what he actually pays in taxes though when he receives the 680 million, 10 years later.

There's also the inflation tax. A 50 % inflation tax wouldn't be that crazy on top of his regular tax, if you factor in 5 % inflation per year over 10 years when he finally receives the money. His money could be worth 25 % less in real terms. Heck if we have inflation at the same rate we had it in the 1970's, his money would be worth half as much when he gets it. But nobody can predict what the inflation will be over 10 years.

He could end up walking away with only 1/3 of what 700 million today is, in inflation adjusted terms and after income tax. Still a lot of money though.

 

[Evilhomer]

none; Clayton Kershaw's entire salary is paid as bonuses during offseason (his residence is Texas with 0 income tax). This is common tax planning for the rich.

I always find it funny that everyone here complains about the Stars, Panthers, Lightning etc having some kind of tax benefits lol. Only benefit is its easier on the tax accountants in those states but good tax accountants will take care of it.

yeah he only gets minuscule salary during the year and has it deferred to the offseason when his residency is Arizona. Mind you Canadian residency laws are a little different than the states but still a good tax accountant will make most taxes for these guys vanish.

Source: am CPA and have some experience in both taxation and audit

Thank you. I've been saying this for years.

 

[Dr.Funk]

 

[Nineteen67]

I totally get the concept, but if the Jays (or whoever) raises the bid, it doesn't matter. The Dodgers are a bottomless pit and have shown tens, if not hundreds, of millions of extra dollars mean nothing.

One would think the fans will eventually be priced out, especially in smaller markets that don’t have the ultra rich supporting them.

 

[GoonieFace]

This guy makes 700 million less than Ohtani and will not be 700 million times worse, this is a win

 

[WillNy29]

So what about for Ohtani?

If the inflation rate is 2 % for 10 years or 20 % inflation over 10 years, the money will be worth 20 % less or he would receive 80 cents on the dollar.

Or will Ohtani receive the money in inflation adjusted terms by having his money earn interest in the bank?

Naw after present valuation of the contract its actually around like $550 million in todays dollars

I would be interested to know what he actually pays in taxes though when he receives the 680 million, 10 years later.

There's also the inflation tax. A 50 % inflation tax wouldn't be that crazy on top of his regular tax, if you factor in 5 % inflation per year over 10 years when he finally receives the money. His money could be worth 25 % less in real terms. Heck if we have inflation at the same rate we had it in the 1970's, his money would be worth half as much when he gets it. But nobody can predict what the inflation will be over 10 years.

He could end up walking away with only 1/3 of what 700 million today is, in inflation adjusted terms and after income tax. Still a lot of money though.

use the PV formula on your calculator and set the rate to 5%. or put all of his payments in a excel past his first 10 years apply NPV formula to each and tally them up. It is about $550 million so over 2/3rd of what he signed for.

 

[Bjindaho]

I read an explanation of the contract.

Basically, it is only 700M because of the structure. The deal itself is the equivalent to 10 years at 46M per year with the extra money being tied to deferral.

 

[Canadian Finn]

So the the $680,000,000 he will be getting in 10 years when he's out of the country will be earning interest?

Did I get that right? Wild if that's true.

can you kindly calculate me the interest in $680M over 10 years at a standard ROR of 3.5%? (although that's low for that amount).

Please compound it.

Thanks,

 

[WillNy29]

can you kindly calculate me the interest in $680M over 10 years at a standard ROR of 3.5%? (although that's low for that amount).

Please compound it.

Thanks,

don't forget to strip the crazy California taxes out and apply present valuation all the way through

 

[Suntouchable13]

Now it has gotten quiet again on the Jays front, I wonder if we will see a significant move before Christmas day. After a couple decades of being a fan, I keep wondering why it take so long to hammer out deals in MLB. In the NHL, most significant free agents sign day 1 of free agency. What is so special about MLB?

 

[Bjindaho]

can you kindly calculate me the interest in $680M over 10 years at a standard ROR of 3.5%? (although that's low for that amount).

Please compound it.

Thanks,

Present Value of Future Money​

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[TD]Future Value (FV)[/TD]
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[TD]Number of Periods (N)[/TD]
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[TR]
[TD]Interest Rate (I/Y)[/TD]
[TD][/TD]
[/TR]
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[TD]

​

[/TD]

[TD][/TD]
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[/TABLE]

Results​

Present Value: $482,064,793.32
Total Interest: $197,935,206.68

Note: This doesn't account for it being spread over 10 years.

Present value of 68M per year over 10 years at 3.5% is $585,322,682.60

Double edit: If I plug everything back in, the PV on the whole thing drops down to about 415M at 3.5 percent (assuming my math doesn't suck).

 

[Puckstuff]

Naw after present valuation of the contract its actually around like $550 million in todays dollars


use the PV formula on your calculator and set the rate to 5%. or put all of his payments in a excel past his first 10 years apply NPV formula to each and tally them up. It is about $550 million so over 2/3rd of what he signed for.

I had it at 525 when I did it yesterday but also factor in 50 % income tax on top of the dollars being worth less in 2034. Unless he has a way to not pay income tax to the state of California.

 

[Bjindaho]

I had it at 525 when I did it yesterday but also factor in 50 % income tax on top of the dollars being worth less in 2034. Unless he has a way to not pay income tax to the state of California.

Japan - Tax treaty documents | Internal Revenue Service

Japan - Tax Treaty Documents

www.irs.gov

 

[WillNy29]

I had it at 525 when I did it yesterday but also factor in 50 % income tax on top of the dollars being worth less in 2034. Unless he has a way to not pay income tax to the state of California.

do the Kershaw; make your residence in Texas and have your salary as season deferred bonus lol.

One thing everyone is forgetting is that Japanese citizens may also be subject to income tax on globally earned income. So he has to pay Japanese income tax as well.

Japan - Tax treaty documents | Internal Revenue Service

Japan - Tax Treaty Documents

www.irs.gov

are these corporate tax treaties or employment income based tax treaties?

 

[Bjindaho]

do the Kershaw; make your residence in Texas and have your salary as season deferred bonus lol.

One thing everyone is forgetting is that Japanese citizens may also be subject to income tax on globally earned income. So he has to pay Japanese income tax as well.


are these corporate tax treaties or employment income based tax treaties?

There is an income tax treaty on the list

I think the terms of the agreement would determine the income tax provisions. If tax accountants can argue that signing bonuses (and the like) can be earned in Texas (by guys like Kershaw) then the argument that Ohtani (as a non-resident of the US) earns his income in Japan when he goes home to live should be easy.

 

[WillNy29]

There is an income tax treaty on the list

(b) In accordance with the provisions of the laws of Japan, as in force from time to time, regarding
the allowance of a credit against Japanese tax of tax payable in any country other than Japan, Japan shall
allow to a resident of Japan as a credit against Japanese tax the appropriate amount of United States tax
and, in the case of a Japanese corporation owning at least 10 percent of the voting shares of a United States
corporation from which it receives dividends, shall allow credit for the appropriate amount of United States
tax paid by the United States corporation paying such dividends with respect to the profits out of which
such dividends are paid. For the purpose of applying the Japanese credit in relation to taxes paid to the
United States, the rules set forth in Article 6 shall be applied to determine the source of income.

so its an input tax credit for international taxation; meaning whatever tax he pays is deducted from his Japanese tax bill; he would pay whatever is left over to the Japanese tax authorities correct?

 

[Apex Predator]

Doesn’t matter if the money is worth 700 million or 500 when it is all said and done. Financially Ohtani is fine and the difference in the money won’t affect his every day life.