Rumor: Rumors & Proposals Thread | Broberg, Holloway and Ceci are Gone, Do We Add Another D Before Camp?

[McTonyBrar]

Well then.

Didn't Seravalli report this like 2 weeks ago?

 

[Fourier]

The way to do is pay them basically what they want (their top ask) and even 5% above that. The 5% then covers their interest for borrowing, basically the Oilers are giving them an interest free loan by paying them a little more.

Of course for doing all that, they have to return the favor and defer their salary so as to bring their cap hit way down, but even this is a plus for the athlete. No player wants half their salary going to taxes. Deferring the money allows them to move into a lower tax residence after retirement and then receive all of that money at a lower tax rate.

Effectively this would actually probably make Draisaitl and Bouchard a lot more money even when accounting for getting the NHL salary later.

So I understand this are you suggesting that the non-deferred salary be the 5% each year and that all additional salary beyond that needed to hit the league minimum is deferred? One issue is that the player would still be heavily taxed on the 5%.

 

[Soundwave]

So I understand this are you suggesting that the non-deferred salary be the 5% each year and that all additional salary beyond that needed to hit the league minimum is deferred? One issue is that the player would still be heavily taxed on the 5%.

You'd have to work out some kinks, I'm sure Katz has a legion of investment experts that would know how to do this even better than what I've described, but essentially yeah. 5% interest is probably going down over the years too, they'll probably be able to borrow at like 2-3% or something less over the time of the contract.

Here's a video explaining why uber-rich people like Jeff Bezos, Elon Musk essentially borrow their money, they don't spend or cash in their assets. Now an NHL player likely could use a $90-$100 million+ guaranteed contract as collateral. Katz is part of this uber-rich club, I'm sure he and his advisors could guide players how to secure a loan for purposes of investing.

 

[SupremeTeam16]

I said this in the other thread, but here's a concept ... pay Draisaitl and Bouchard *more*.

14 mill for Drai + 5% bonus (750,000 extra) = 14.75 m

11 mill for Bouchard + 5% bonus (550,000 extra = 11.55 m

Now you may say "wait! that's crazy, it's the opposite of what we want to do, and why are we giving them a stupid 5% bonus!".

The 5% extra we're paying is effectively covering the players being able to get a line of credit. They can then borrow the money they should have and use that to invest in whatever investment they want as if they had their regular salary now.

In return, the players agree to Shohei Ohtani basically their entire salary, defer it until basically retirement. That could bring Draisaitl's contract into the 9.7 million range and Bouchard similarly for like 8.5 million.

Then post retirement they move to a lower tax residence and cash in all of their NHL earnings from this contract at a far lower tax rate than they would have been stuck with had they had a normal contract.

The player gets more money (a lot more if they move to a lower tax residence post retirement) this way and the Oilers get a ton of cap flexibility. This could also allow us to lock in Bouchard for 8 full years and not some 3-4 bridge year bullshit.

Speaking from experience, it’s not as simple as just moving to a low tax jurisdiction. You would have to find a country with an acceptable tax treaty (or no tax treaty) with Canada. You have to meet certain requirements to become a non-resident, including either disposing or deemed disposition of Canadian assets where the Feds will hammer you with their new capital gains inclusion rate, so that has to be taken into account. Of course there’s always loopholes and back doors but it can be expensive and risky. So it’s just not as simple as moving to another country and getting paid, there’s a lot of consideration and bean counting and planning that needs to happen.

Another thing is the legal battle between the CRA and Tavares over whether signing bonuses should be considered income as part of a compensation package. That could have some pretty substantial tax implications for contracts with big signing bonus money, which could affect the math for players considering deferral.

 

[Soundwave]

Speaking from experience, it’s not as simple as just moving to a low tax jurisdiction. You would have to find a country with an acceptable tax treaty (or no tax treaty) with Canada. You have to meet certain requirements to become a non-resident, including either disposing or deemed disposition of Canadian assets where the Feds will hammer you with their new capital gains inclusion rate, so that has to be taken into account. Of course there’s always loopholes and back doors but it can be expensive and risky. So it’s just not as simple as moving to another country and getting paid, there’s a lot of consideration and bean counting and planning that needs to happen.

Another thing is the legal battle between the CRA and Tavares over whether signing bonuses should be considered income as part of a compensation package. That could have some pretty substantial tax implications for contracts with big signing bonus money, which could affect the math for players considering deferral.

I mean Leon isn't even a Canadian citizen, Switzerland for example is right next door to Germany.

Tavares is a Canadian citizen who works and lives in Canada full time that's a little different.

That said if you have a lot of money it's not nearly as difficult, how many wealthy Canadians go live in the US for example (Katz included, does he even live in Canada any longer? I don't think so). There's lots of just regular ol' middle class Canadians that move to Florida or Arizona all the time.

If anything actually having a line of credit and investing money and then paying taxes to the Canadian government during the length of that contract is a plus even for like CRA. They get to charge capital gains on those investments and dividends and interest made, they don't care if you borrowed the money or not, that's on the tax payer to figure out how to pay that back.

They would probably raise a larger stink if it was a case of just straight deferral.

 

[SupremeTeam16]

I mean Leon isn't even a Canadian citizen, Switzerland for example is right next door to Germany.

Tavares is a Canadian citizen who works and lives in Canada full time that's a little different.

That said if you have a lot of money it's not nearly as difficult, how many wealthy Canadians go live in the US for example (Katz included, does he even live in Canada any longer? I don't think so).

If anything actually having a line of credit and investing money and then paying taxes to the Canadian government during the length of that contract is a plus even for like CRA. They get to charge capital gains on those investments and dividends and interest made, they don't care if you borrowed the money or not, that's on the tax payer to figure out how to pay that back.

They would probably raise a larger stink if it was a case of just straight deferral.

What does citizenship have to do with anything? When it comes to taxes it’s residency that matters, not citizenship.

You can’t really compare modestly wealthy athletes who are taxed as individuals to billionaires like Katz, Musk and others whose wealth and assets are often tied to corporations.

What you are suggesting means a player gets taxed at marginal rate on their income (which may very well soon include signing bonus money) then they get taxed at the new capital gains rates on the money the borrowed investment returns, plus the interest on any loans. Then they get taxed again at the new capital gains rate when they divest any assets to satisfy non-resident requirements. Plus all the costs and expenses associated with moving abroad. When you add it all up, it might not be worth it for the player just to save taxes on deferred money.

 

[McTonyBrar]

Come on Leon sign bro. Some of us can’t take this constant waiting!

 

[Fourier]

You'd have to work out some kinks, I'm sure Katz has a legion of investment experts that would know how to do this even better than what I've described, but essentially yeah. 5% interest is probably going down over the years too, they'll probably be able to borrow at like 2-3% or something less over the time of the contract.

Here's a video explaining why uber-rich people like Jeff Bezos, Elon Musk essentially borrow their money, they don't spend or cash in their assets. Now an NHL player likely could use a $90-$100 million+ guaranteed contract as collateral. Katz is part of this uber-rich club, I'm sure he and his advisors could guide players how to secure a loan for purposes of investing.

I am certainly aware of the content of the video. This is basically a tax avoidance maneuver. Or at worst a tax deferral maneuver.

Pretty hard to get money at 2-3% these days. That would be closer to what the BoC or a province might get money at if interest rates go down.

I understand your plan now. I think that in its fullest it would be extremely unlikely that a hockey player would bite. But to get reasonable deferral a good financial plan would be essential. And elements of your plan could well come into play.

 

[Soundwave]

What does citizenship have to do with anything? When it comes to taxes it’s residency that matters, not citizenship.

You can’t really compare modestly wealthy athletes who are taxed as individuals to billionaires like Katz, Musk and others whose wealth and assets are often tied to corporations.

What you are suggesting means a player gets taxed at marginal rate on their income (which may very well soon include signing bonus money) then they get taxed at the new capital gains rates on the money the borrowed investment returns, plus the interest on any loans. Then they get taxed again at the new capital gains rate when they divest any assets to satisfy non-resident requirements. Plus all the costs and expenses associated with moving abroad. When you add it all up, it might not be worth it for the player just to save taxes on deferred money.

It's not like you have to be Katz wealth to do this, regular joes change residency all the time, let alone people with net worth of over $100 million like a Leon Draisaitl will have.

You're right residency is all that matters, there's nothing stopping anyone with that much money from getting residency in say Florida or the Bahamas or Switzerland after they retire.

Case in point, Ohtani is 100% changing his residency after he retires to avoid paying 14% state tax in California. There is the odd politician there that's trying to make a stink about it, but there's nothing they can really do.

You can't force anyone to have a residency somewhere they don't want to be especially when they are no longer bound to stay there for work.

You pay taxes on investments (cap gains, dividend income, etc.) whether the money is borrowed or not, it wouldn't be any different in that sense, and when you leave the country yes you pay a capital gain on whatever profit you have made (capital gains on investments are taxed much lower than income at high salary, so that isn't even so bad). But that would happen regardless unless Leon is planning to live in Alberta or Canada forever after retirement, which I doubt he would.

How many Canadian players even live in Canada post retirement? Not many. Ryan Smyth? Lives in Nashville. Jarome Iginla? Lives in Boston. Hemsky after retirement lived in Texas. Etc. etc. etc. It doesn't mean you can't have like a vacation property in Kelowna or Southern Ontario if you want that.

 

[SupremeTeam16]

It's not like you have to be Katz wealth to do this, regular joes change residency all the time, let alone people with net worth of over $100 million like a Leon Draisaitl will have.

You're right residency is all that matters, there's nothing stopping anyone with that much money from getting residency in say Florida or the Bahamas or Switzerland after they retire.

Case in point, Ohtani is 100% changing his residency after he retires to avoid paying 14% state tax in California. There is the odd politician there that's trying to make a stink about it, but there's nothing they can really do.

You can't force anyone to have a residency somewhere they don't want to be especially when they are no longer bound to stay there for work.

You pay taxes on investments (cap gains, dividend income, etc.) whether the money is borrowed or not, it wouldn't be any different in that sense, and when you leave the country yes you pay a capital gain on whatever profit you have made (capital gains on investments are taxed much lower than income at high salary, so that isn't even so bad). But that would happen regardless unless Leon is planning to live in Alberta or Canada forever after retirement, which I doubt he would.

How many Canadian players even live in Canada post retirement? Not many. Ryan Smyth? Lives in Nashville. Jarome Iginla? Lives in Boston. Hemsky after retirement lived in Texas. Etc. etc. etc. It doesn't mean you can't have like a vacation property in Kelowna or Southern Ontario if you want that.

I don’t know why you’re talking about people being forced to live somewhere. All I’m saying is that this grand plan likely isn’t as financially beneficial as you’d like to believe, it comes with certain risk, and with big tax bills when divesting. It likely cuts you off from other tax planning methods, costs you interest on borrowed money. There is a lot of reasons why it wouldn’t be attractive for a player to do this and all those reasons have to be weighed against the competitive benefits of doing so.

 

[Soundwave]

I don’t know why you’re talking about people being forced to live somewhere. All I’m saying is that this grand plan likely isn’t as financially beneficial as you’d like to believe, it comes with certain risk, and with big tax bills when divesting. It likely cuts you off from other tax planning methods, costs you interest on borrowed money. There is a lot of reasons why it wouldn’t be attractive for a player to do this and all those reasons have to be weighed against the competitive benefits of doing so.

Actually this could make a player a lot more money. I can understand studying this why Ohtani would prefer this type of contract, the Dodgers actually offered him 170 million upfront, but he took the 146 million deferred willingly. Now some lay people thought it was because he's uber generous and willing to take way less. I don't think that's the case at all, he knew full well that this structure will make him more money in the long run.

People don't actually think about this even if they're aware but income tax is the worst bracket to be in.

Captial gains taxes are much more preferable. If you're paying capital gains tax not only is the rate much lower than income, you're also only paying on the profit earned.

14 million in income salary is really only 7.28 million take home for the hockey player if they're a Canadian resident.

If a player were to do what I was suggesting they could potentially get much closer to 14 million/year take home, and if they use their contract as collateral, they could earn 5%-6% on a very conservative portfolio while waiting for the tax pay out which then mitigates the cost of waiting for that money.

I mean this is stuff Katz' people probably know way more about. I doubt he bought that massive home in LA (biggest home in North America I believe) with cash, he probably himself borrowed against his own assets to seal the deal on the down payment and then probably locked in at a low interest rate mortgage.

 

[ottawah]

In essence this scenario is what they do in these deferred situations already. That is precisely what the present value calculation addresses. The issue though is that the cap hit would be $13M not the $1M that @ottawah claims. Now if it was done underground without notifying the league then yes they could do this. Of course that would be such obvious cap circumvention that the League would give the Flames every first round pick the Oiler have from now until 2297. And my guess is that if the Oilers tried to register a deal paying Leon $1M per year someone in the League would get their hackles up.

Why would it be 13M? Based on the information from the Seth Jarvis contract, signing bonuses deferred to after a contract is over will cause it not to count towards the cap.

Jarvis got an 8 year 63.2M deal, which normally would have counted counted 7.9M against the cap. In fact it only counts 7.4M against the cap as a certain amount (one would assume 4M) has been deferred to year 9 or after the contract is over, which technically does not exist. The cap hit is only calculated on money for the duration of the contract. The actual implementation is fuzzy, no one has quite answered if you could do this with a one year contract, all we can really go on is the Jarvis contract.

Sources: Hurricanes and Seth Jarvis agree to $63.2 million contract with unique deferred structure

The Carolina Hurricanes and restricted free agent Seth Jarvis have agreed to terms on a new eight-year, $63.2 million contract,...

www.dailyfaceoff.com

So this apparently is allowed, there is nothing underhanded about it. The Hurricanes did it with the Slavin contract, by a small amount. Then upped it to save 500M with Jarvis. This looks to be something that every team is going to have in the arsenal now to lower their cap hit

 

[ottawah]

Interesting idea. I don't think they would be allowed to that.

What you could do I suppose is the player goes and borrows against his future earnings, I'm not very well versed on that but apparently ultra rich people do that all the time (ie: instead of selling their stocks they borrow against the value of their wealth).

Its less about the borrowing, and more abuot using this "loophole" Carolina is exploiting to lower cap hit below the actual contract value. The big question is why would a player lock up money for that length of time, they would all prefer it today hence this is not something to be used often. My point is a team could effectively pay each years signing bonus into an investment vehicle, calculate what it is worth when a deferred payment is due, and boost the signing bonus to eat up the interest this investment vehicle would accrue. So sure the salary looks idiotic by todays standard, but the player also has to wait 9 years to collect. In the meantime the team pays the same amount, and gets the benefit of a massively reduced cap hit.

 

[Soundwave]

Its less about the borrowing, and more abuot using this "loophole" Carolina is exploiting to lower cap hit below the actual contract value. The big question is why would a player lock up money for that length of time, they would all prefer it today hence this is not something to be used often. My point is a team could effectively pay each years signing bonus into an investment vehicle, calculate what it is worth when a deferred payment is due, and boost the signing bonus to eat up the interest this investment vehicle would accrue. So sure the salary looks idiotic by todays standard, but the player also has to wait 9 years to collect. In the meantime the team pays the same amount, and gets the benefit of a massively reduced cap hit.

I'm honestly think you could just use your contract as collateral and borrow against it and use that to invest the same exact way you would have otherwise.

I suspect this is what Ohtani is doing in baseball. Not only is he going to cash in his salary in some low tax residence after his playing days are done, he's probably easily able to secure a loan and use that to invest now as if he had access to the money in the here and now.

Ohtani purposely chose this contract structure, the Dodgers actually offered him a traditional "chop half your salary off due to taxes" contract of 170 million I believe. He chose 146 deferred instead.

 

[Fourier]

Why would it be 13M? Based on the information from the Seth Jarvis contract, signing bonuses deferred to after a contract is over will cause it not to count towards the cap.

Jarvis got an 8 year 63.2M deal, which normally would have counted counted 7.9M against the cap. In fact it only counts 7.4M against the cap as a certain amount (one would assume 4M) has been deferred to year 9 or after the contract is over, which technically does not exist. The cap hit is only calculated on money for the duration of the contract. The actual implementation is fuzzy, no one has quite answered if you could do this with a one year contract, all we can really go on is the Jarvis contract.

Sources: Hurricanes and Seth Jarvis agree to $63.2 million contract with unique deferred structure

The Carolina Hurricanes and restricted free agent Seth Jarvis have agreed to terms on a new eight-year, $63.2 million contract,...

www.dailyfaceoff.com

So this apparently is allowed, there is nothing underhanded about it. The Hurricanes did it with the Slavin contract, by a small amount. Then upped it to save 500M with Jarvis. This looks to be something that every team is going to have in the arsenal now to lower their cap hit

It's not underhanded but your cap calculation is wrong. The way deferral works is that the teams are responsible for the present value of all the deferred salary.

 

[ottawah]

Reading a bit more, this deferred salary is not really dollar for dollar, but still is a valid way to reduce a cap hit, but its hard to find the formula for it. Jarvis contract deferred 15M from his first 3 years over 8 years, resulting in cap savings of 4M over 8 years.

It's not underhanded but your cap calculation is wrong. The way deferral works is that the teams are responsible for the present value of all the deferred salary.

Yes but the point is the present value is less than the total value meaning you can sign players to contracts where their cap hit is noticeably lower than the contract value.

 

[Soundwave]

I think need to stop acting like this is some kind of shady, illegal act. It's literally in the CBA and the formula for how to calculate it is even in the CBA.

Now if a player chooses to take tax planning/investment planning advice from a team on how they manage their money to maximize return ... there's nothing wrong with that either.

Though I'd be pretty clear if I'm Katz, if you're the NHL you tell us if this is within the rules or not. And once you approve the contract, that's that. We'll even give you extra time to go over the contract. If you want to cry about it 3-4 years down the road, prepare for a lawsuit because we presented the contract and asked you to go over it multiple times and approve it.

No grey area bullshit, like either you can do this or not, and if it's approved, that's the end of that.

The Kovalchuk thing I believe that was problematic because the NHL was operating under the assumption that teams really thought players would play until like age 42 or whatever. In this case that isn't an issue, there's no duplicity. The team is agreeing to pay the player their money valued by a calculation by the NHL's own rules at a later date. And then they're going to go ahead and do exactly that.

 

[Fourier]

Reading a bit more, this deferred salary is not really dollar for dollar, but still is a valid way to reduce a cap hit, but its hard to find the formula for it. Jarvis contract deferred 15M from his first 3 years over 8 years, resulting in cap savings of 4M over 8 years.


Yes but the point is the present value is less than the total value meaning you can sign players to contracts where their cap hit is noticeably lower than the contract value.

Take a look at post #955.

By teh way I see in your post you used 4%. The current discount rate is about 5.3% so in fact the cap hit in your scenario would be a hair under $13M.

I think need to stop acting like this is some kind of shady, illegal act. It's literally in the CBA and the formula for how to calculate it is even in the CBA.

Now if a player chooses to take tax planning/investment planning advice from a team on how they manage their money to maximize return ... there's nothing wrong with that either.

Though I'd be pretty clear if I'm Katz, if you're the NHL you tell us if this is within the rules or not. And once you approve the contract, that's that. We'll even give you extra time to go over the contract. If you want to cry about it 3-4 years down the road, prepare for a lawsuit because we presented the contract and asked you to go over it multiple times and approve it.

No grey area bullshit, like either you can do this or not, and if it's approved, that's the end of that.

The Kovalchuk thing I believe that was problematic because the NHL was operating under the assumption that teams really thought players would play until like age 42 or whatever. In this case that isn't an issue, there's no duplicity. The team is agreeing to pay the player their money valued by a calculation by the NHL's own rules at a later date. And then they're going to go ahead and do exactly that.

I agree that it is completely within the rules and meets both the law and the spirit of the cap.

 

[Soundwave]

Take a look at post #955.

By teh way I see in your post you used 4%. The current discount rate is about 5.3% so in fact the cap hit in your scenario would be a hair under $13M.


I agree that it is completely within the rules and meets both the law and the spirit of the cap.

I would want that in duplicate and triplicate if I'm Katz and I have a deferred contract. If you approve this NHL, we gave you multiple chances to look at the contract and are assuming you understand it fully. After the contract is approved, that it's, end of discussion on that unless you want a lawsuit on your hands.

 

[Nostradumbass]

Actually this could make a player a lot more money. I can understand studying this why Ohtani would prefer this type of contract, the Dodgers actually offered him 170 million upfront, but he took the 146 million deferred willingly. Now some lay people thought it was because he's uber generous and willing to take way less. I don't think that's the case at all, he knew full well that this structure will make him more money in the long run.

People don't actually think about this even if they're aware but income tax is the worst bracket to be in.

Captial gains taxes are much more preferable. If you're paying capital gains tax not only is the rate much lower than income, you're also only paying on the profit earned.

14 million in income salary is really only 7.28 million take home for the hockey player if they're a Canadian resident.

If a player were to do what I was suggesting they could potentially get much closer to 14 million/year take home, and if they use their contract as collateral, they could earn 5%-6% on a very conservative portfolio while waiting for the tax pay out which then mitigates the cost of waiting for that money.

I mean this is stuff Katz' people probably know way more about. I doubt he bought that massive home in LA (biggest home in North America I believe) with cash, he probably himself borrowed against his own assets to seal the deal on the down payment and then probably locked in at a low interest rate mortgage.

As a person who does this sort of stuff every day, you have no clue what you're talking about.

Please, just stop.

 

[Soundwave]

As a person who does this sort of stuff every day, you have no clue what you're talking about.

Please, just stop.

Why don't you specifically cite what you have a problem with, otherwise there's no point in having a discussion. Unless you think Ohtani is stupid or his accountants don't understand this stuff either.

 

[CanadasTeam99]

Ohta

Why don't you specifically cite what you have a problem with, otherwise there's no point in having a discussion. Unless you think Ohtani is stupid or his accountants don't understand this stuff either.

Ohtani is a rare breed who has a lot and doesn't worry about the rest.

He has that immigration thinking where the parents make it and just spread the wealth out later to their kids. Not buying a boat, buying a cottage, etc.

 

[Soundwave]

Ohta

Ohtani is a rare breed who has a lot and doesn't worry about the rest.

He has that immigration thinking where the parents make it and just spread the wealth out later to their kids. Not buying a boat, buying a cottage, etc.

He is going to move out of California when his playing career is over and pay less tax. Everyone knows it. Even in California some politicians are sour about it but they can't do anything about it. Don't kid yourself into thinking he's some clueless yokel and his agents/accountants just randomly pushed for this very concise contract structure.

https://www.nytimes.com/athletic/5406619/2024/04/10/shohei-ohtani-tax-loophole-legislation/

 

[McTonyBrar]

https://x.com/i/web/status/1830811463168204913

 

[nerevarine]

https://x.com/i/web/status/1830811463168204913

I want to believe but these guys havnt exactly shown to be reliable