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Other Sports: Philadelphia Phillies: The Road To .500 (2023 Edition)

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DancingPanther said:
I get everything else now but how is he getting the present value of 41M?
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The 5% interest rate on the USD applied over the time of the deferral.

Jack Straw said:
How does this impact the Dodgers’ luxury tax situation? Does the entire $70 million count or just the non-deferred part?
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Neither. It's 43.7 AAV for tax purposes. The math is a couple of posts up (#11943).
 
JojoTheWhale said:
The 5% interest rate on the USD applied over the time of the deferral.



Neither. It's 43.7 AAV for tax purposes. The math is a couple of posts up (#11943).
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Jojo, I need you to slow this down to a frame per second for me.

To me, what you're explaining is this:
68M x 1.05 (that is, 5% interest) = 41M

This is obviously not right. What am I missing

EDIT: I get it now. It's finances stuff. Present value is an actual thing
 
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@JojoTheWhale why is the present value of this contract different than the actual cap hit? Because it's deferred in the first place?

I sign for 100M over 10 years with each installment of 10M being paid in full at the present time. Therefore there's no diminishing return etc to factor in? He gets 2M in "now" dollars every year, but his 68M deferred isn't going to actually be worth 68M when each installment is paid out. Is that the idea?
 
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DancingPanther said:
@JojoTheWhale why is the present value of this contract different than the actual cap hit? Because it's deferred in the first place?

I sign for 100M over 10 years with each installment of 10M being paid in full at the present time. Therefore there's no diminishing return etc to factor in? He gets 2M in "now" dollars every year, but his 68M deferred isn't going to actually be worth 68M when each installment is paid out. Is that the idea?
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Correct. It's the value of the dollar at the time it's paid. There will be inflation. There is always inflation (except Japan).

Chinatown88 said:


200IQ Japanese man
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Right, only the NHL would Kovalchuk a team.
 
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DancingPanther said:
It's a brilliant contract. I hate the f***ing Dodgers
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Because of IRS tax codes I believe if compensation is deferred to 10 years or beyond (from the point of being earned) that compensation is then taxed based on the residence of the taxpayer AT THAT POINT, not based on where they were when originally 'working'.

So Ohtani can have his legal residence as in Japan and come 2035 that $68M will be taxed based on that.

Unless he established his permanent/legal residence in California he will only ever pay California taxes on the $2M a year.

Of course this is all predicated on very selective accounting and having the salary distributed a specific way. The Dodgers do not fall under the IRS category of a non-profit or government organization so that removes one of the options for having a deferred compensation not be taxed at state level.

There are certain retirement plans and annuity pay-out agreements that may qualify though.
 
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Hollywood Cannon said:
Nope. ~$46M

Dodgers playing chess.
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Apparently MLB rules dictate that the deferred salary be placed into an escrow. So the Dodgers will be paying Ohtani $2m a year and then putting $44m into an escrow. So they are still having to 'spend' that money from their yearly budget/expenses.

Although the MLB rules forcing them to do so probably will have the Dodgers earn interest in excess of the $68M they have to pay Ohtani 10 years later. So over that 10 year period from putting the $44m into escrow they may actually end up with a refund of like $3m to $5m each year because of how much they earn off the $44m over a 10 year period.

Depends on how the 'escrow' account is specified and what kind of actual investment/interest bearing options the team is allowed.
 
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Flybynite said:
Apparently MLB rules dictate that the deferred salary be placed into an escrow. So the Dodgers will be paying Ohtani $2m a year and then putting $44m into an escrow. So they are still having to 'spend' that money from their yearly budget/expenses.

Although the MLB rules forcing them to do so probably will have the Dodgers earn interest in excess of the $68M they have to pay Ohtani 10 years later. So over that 10 year period from putting the $44m into escrow they may actually end up with a refund of like $3m to $5m each year because of how much they earn off the $44m over a 10 year period.

Depends on how the 'escrow' account is specified and what kind of actual investment/interest bearing options the team is allowed.
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I would be curious as to whether they're allowed to earn interest on the escrow account.

This whole thing is crazy.
 
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