Abstract

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Will the Tax Man Cometh to Coach Rodriguez?


Douglas A. Kahn


University of Michigan Law School

Jeffrey H. Kahn


Florida State University - College of Law

August 4, 2008

Tax Notes, Vol. 120, No. 5, pp. 274-278, 2008
U of Michigan Public Law Working Paper No. 175

Abstract:     
When Richard Rodriguez moved from West Virginia University to the University of Michigan. Coach Rodriguez had a contract with his former employer that required him to pay $4 million dollars to West Virginia if he left for another coaching position. After a suit was filed, it was reported that the parties agreed that the $4 million dollars will be paid to West Virginia, of which Rodriguez will pay $1.5 million dollars in installments, and the University of Michigan (his new employer) will pay the remaining $2.5 million. How tax law applies to that buyout and whether Coach Rodriguez will incur federal income tax liability because of Michigan’s payment of $2.5 million are interesting questions. Simply put, will Michigan’s payment of 62.5 percent of the buyout obligation cause the taxman to cometh to Coach Rodriguez?

We conclude that a payment of a buyout fee to terminate an employment contract is a deductible expense, and that the employee does not incur income tax liability when the new employer pays all or part of his buyout obligation.

Number of Pages in PDF File: 6

Keywords: Taxation, Employment, Termination, Buyout, Rodriguez, Coach

JEL Classification: H20, H24, H25

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Date posted: November 23, 2009 ; Last revised: December 15, 2009

Suggested Citation

Kahn, Douglas A. and Kahn, Jeffrey H., Will the Tax Man Cometh to Coach Rodriguez? (August 4, 2008). Tax Notes, Vol. 120, No. 5, pp. 274-278, 2008; U of Michigan Public Law Working Paper No. 175. Available at SSRN: http://ssrn.com/abstract=1510385

Contact Information

Douglas A. Kahn
University of Michigan Law School ( email )
625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4043 (Phone)
Jeffrey H. Kahn (Contact Author)
Florida State University - College of Law ( email )
425 W. Jefferson Street
Tallahassee, FL 32306
United States
850.644.7474 (Phone)
HOME PAGE: http://www.law.fsu.edu/faculty/jkahn.html
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