Derek Jeter received many fine gifts on the occasion of his retirement from baseball. As tax attorney Rob Wood points out in this report and in his Forbes article “Derek Jeter's Big Tax Bill On 'Gifts' That Really Aren't Gifts,” Jeter will owe some taxes on these gifts.
Jeter earned about $265 million during his baseball career. As he left baseball, he received a number of gifts from the Yankees and from other baseball teams. Wood notes that most of us assume, usually correctly, that a gift is not income. However, things are not always what one might expect. “The question is, are these gifts the way you give a child or family member a Christmas gift” or are they promotional items? Wood says that these gifts are business gifts, and the baseball clubs are deducting them as expenses. That makes them taxable to Jeter.
Wood notes that the gifts received by Jeter include golf clubs, wine, vacation packages, cowboy boots, a kayak, framed jerseys autographed by the two captains of the Cincinnati Reds, photos of the day Jeter was named captain, a massage therapy machine, a 10-day trip to Italy, Waterford Crystal, a seat from the Kingdome (where Jeter made his major-league debut), and a $34,000 watch.
There is also a distinction between gifts given to an employee to encourage him to stay and gifts like these. There are valuation issues, Wood says, but these gifts will be taxable. The amount due will be about $16,000. Wood notes that Jeter will have no trouble coming up with the money. Situations like this are the reason celebrities and sports stars need to have tax advisors.
For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.