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Basketball Fan
11-10-2010, 12:56 PM
http://blogs.forbes.com/williampbarrett/2010/11/09/lamar-odom-seeks-tax-deduction-for-nba-fines-and-fitness-fees/


Lamar Odom Seeks Tax Deduction For NBA Fines and Fitness Fees
Nov. 9 2010 - 12:08 pm | 3,692 views | 2 recommendations | 10 comments
By WILLIAM P. BARRETT
Los Angeles Lakers forward Lamar Odom during a...

Image by AFP/Getty Images via @daylife

Playing upon a different court, Los Angeles Lakers basketball forward Lamar Odom has sued the Internal Revenue Service, which said he couldn’t take tax deductions for $12,000 in sports fines and another $178,000 spent getting himself in shape.

The 6-foot-10 Odom, an important cog in the Lakers’ two-seasons-in-a-row championship performance, filed suit in U.S. Tax Court to fight an IRS bill for $87,000 over his taxes for 2007. That includes $9,000 in interest. However, unlike many IRS efforts to collect money, the bill did not include a claim for accuracy-related penalties. This might mean the agency sees his case somewhat less harshly than others it duns.

A college dropout, Odom is representing himself without a lawyer. In his personally signed pleading, filed at the court’s Washington, D.C. office on October 25, Odom disputed a bill that the IRS sent him in August. “The taxpayer claimed $12,000 of employee business expenses for fines that were assessed by the National Basketball Association,” he declared, writing in the third person. “These fines are commonly assessed on professional athletes and are work related. Therefore the fines incurred are ordinary and necessary employee business expense.” The petition, which listed his address as an agent’s office in Los Angeles, offered no details about the nature of transgressions leading to the fines.

Federal law generally prohibits tax deductions for financial sanctions resulting from criminal cases and matters like traffic violations. But Odom wrote, “The fines imposed by the team and the NBA are not imposed for the violation of any government law and are therefore not specifically excluded.”

On the same reasoning, Odom, now 31, also attacked an IRS decision not to allow taxpayers in effect to subsidize his efforts as a pro athlete to stay fit. “The taxpayer claimed $178,337 of employee business expenses for professional training and conditioning,” he wrote. “The taxpayer’s employment contract requires that the taxpayer be in sufficient physical condition that allows him to perform as a professional basketball player throughout the basketball season.”

Tax law and court cases have tended to frown on writing off such items. In the explanation attached to its bill, the IRS wrote Odom, “We have disallowed some of the expenses you claimed as business expenses because it was determined they were personal expenses and not deductible.”

The oft-injured but tenacious Odom is probably good for the money. Papers attached to his pleading put his 2007 adjusted gross income at $9.3 million. News reports say he is in the the second year of a deal with the Lakers worth up to $33 million. In addition, he is a paid endorser for Samsung cell phones and has his own line of clothing.

A native New Yorker and product of a broken family, Odom certainly has some experience with non-governmental sanctions. His budding career as a player at University of Nevada, Las Vegas was aborted in 1997 when a NCAA investigation said he had received $5,600 from a school booster. After one season at the University of Rhode Island, Odom went pro. But in his third season with the Los Angeles Clippers, in 2001, he was suspended for violating the NBA’s anti-drug policy.

Following one year with the Miami Heat, he joined the Lakers in 2004, where he remains. In 2009 he married television reality star Khloé Kardashian.

Declares his slick Web site, “Lamar has experienced more breathtaking highs and shattering lows than most people can imagine.”

travmil
11-10-2010, 01:06 PM
....I fought the Law and the, Law won...

The IRS will simply get out the list of NBA fines levied that season and point out that 97% of players received no fines at all. As far as the training expenses, those aren't required expenses either. He could've trained on his own at the Lakers facilities and not spent a dime. If he feels it's necessary to pay someone to train him, that's on him.

MyFavMartin
11-10-2010, 01:19 PM
People can't deduct parking until it reaches a very high level and even then it's only for the amount over that limit. So as the IRS, I would likewise argue that the fines are an avoidable expense of employment. Not really sympathetic to Lamar on this, but I do like that he's standing up for himself.

If he can afford a lawyer, he should use one.

BillS
11-10-2010, 01:35 PM
I can understand the fitness deductions, if I have a home office and use it exclusively for business I don't get disallowed because my employer also provides me an office. I think those would be perfectly reasonable deductions for an athlete.

Fines ... nope. The closest thing I could think of would be defining them as reductions in income rather than something he has to pay - if you are docked by your employer for missing hours, for example, that never shows up as income. There might be an argument that the NBA should account it differently, but I think it makes sense for those to be non-deductible expenses.

King Tuts Tomb
11-11-2010, 01:35 AM
"The oft-injured but tenacious Odom is probably good for the money."

Not sure I'd describe Odom as oft-injured or tenacious.

Didn't Forbes say Kevin McHale was the best GM in sports a couple years ago?

Bball
11-11-2010, 02:04 AM
Hmmm... what's the saying? The person who represents himself has a fool for a client...

I suspect he figures he'll end up paying in the end so figures he doesn't want the expense of a lawyer to fight claims he'll likely lose anyway. And maybe he gets a sympathetic ear and ends up with something less than the max here. It would kind of suck to get the interest charges removed... and then have an atty bill for more than the interest charge itself.

Kstat
11-11-2010, 05:01 AM
More likely that the IRS makes an exanple of him and throws the book at him...

travmil
11-11-2010, 07:26 AM
More likely that the IRS makes an exanple of him and throws the book at him...

That's exactly what I was thinking.

nerveghost
11-11-2010, 08:06 AM
Seems like labelling "fitness expenses" as "personal" and not "work-related" is crazy, unless of course the cost includes brazilian waxes for his wife.

Eindar
11-11-2010, 09:15 AM
More likely that the IRS makes an exanple of him and throws the book at him...

Not going to happen. This is not a criminal case, this is a tax court case, which means Lamar has already paid his past due taxes. The only decision for the judge is whether all, none, or some of these expenses should be allowable. To me, the penalties not being assessed is very telling. Either Lamar made a very compelling case as to why he wasn't negligent, he has a good argument and the Agent was trying to get him to agree to the changes without fighting it, or the penalties when to the preparer of his return.

Simply put, he's screwed on the fines. It's part of the Code. Nothing to see here, move along. I enjoyed the angle he has taken in regards to it being issued by the team, not by any government agency, but the defense to that is that he elected to be fined for doing something wrong.

I think he's got a much better leg to stand on in terms of the training expenses. I think it's a little shaky for the Agent to classify these as personal expenses, as if he was some lawyer who enlisted a personal trainer to the stars. I also think it really depends on what he was paying for. Someone earlier said that he could train with the Lakers for free, and that's true, but if his expenses were paid for some sort of specialized training, say for a highly regarded big man coach, or a former hall-of-famer, then I could see it being allowed. This can really be argued either way, and I'll give you both sides.

IRS position: Lamar is provided world-class facilities by his employer in which to maintain his conditioning. Further, assistant coaches and trainers are provided to him in order to improve his game. Any further expenses related to training are an elective expense that the taxpayer chose to engage in, and are non-deductible as a personal expense.

Lamar's argument: I needed specialized training that I could not receive for free. My pay is determined by not only my fitness level, but the overall skillset I bring to the table. This is no different than an accountant deducting Continuing Professional Education to maintain their CPA license. Further, if an allowance is made for professional gamblers to deduct their losses in excess of their expenses, there should be an allowance in the code for professional athletes to deduct expenses related to improving their skill set, which includes their overall athletic abilities.



Regardless, if I were on the bench, I'd disallow the fines and allow the training, as long as it were a reasonable amount compared to other players with his salary, and as long as the training were specifically specialized training to improve ability to get another contract, such as basketball skills or cardio work to play more effectively on both ends.

Eindar
11-11-2010, 09:20 AM
Seems like labelling "fitness expenses" as "personal" and not "work-related" is crazy, unless of course the cost includes brazilian waxes for his wife.

If that were the case they would just separate personal from business and disallow the personal waxes. Hopefully, any amount that is disallowed that Lamar is fighting is for his basketball training expense, not for zumba classes he took with his wife. :)

Eindar
11-11-2010, 09:22 AM
Hmmm... what's the saying? The person who represents himself has a fool for a client...

I suspect he figures he'll end up paying in the end so figures he doesn't want the expense of a lawyer to fight claims he'll likely lose anyway. And maybe he gets a sympathetic ear and ends up with something less than the max here. It would kind of suck to get the interest charges removed... and then have an atty bill for more than the interest charge itself.

He's more likely to get the actual expenses removed than the interest. And winning on the expenses would remove the interest, anyways. It takes a LOT to get interest removed, and even then they only waive it during collection, not examination or tax court.

ballism
11-11-2010, 02:45 PM
It will be interesting to see how court views the fines part. Most fines probably came from comments on referees and flagrants. If u have a contract with a team that says u have to work under NBA rules in order to get paid, you break those rules and get paid less, seems kind of unfair to have to pay taxes for full amount.

Sure, he receives full money and pays fines for contract breach (instead of simply getting reduced salary), but that seems like a technicality. A good legal system should be capable to look past technicalities.

Eindar
11-11-2010, 06:45 PM
It will be interesting to see how court views the fines part. Most fines probably came from comments on referees and flagrants. If u have a contract with a team that says u have to work under NBA rules in order to get paid, you break those rules and get paid less, seems kind of unfair to have to pay taxes for full amount.

Sure, he receives full money and pays fines for contract breach (instead of simply getting reduced salary), but that seems like a technicality. A good legal system should be capable to look past technicalities.

That's the thing, he doesn't get paid less, he gets paid the full amount, and then has to pay some of that money to the league in the form of a fine. This is different from if you are suspended without pay from your job, because your W-2 would reflect that reduced income, and you don't have to pay taxes on that.

If memory serves me, the money lost to fines goes to charity. Depending on if the donation is made in Lamar Odom's name, he could, in theory, claim the deduction as a charitable contribution instead of a fine. He would have more traction going down that avenue as opposed to saying it's a fine he gets to claim, because the Code is very clear on fines and penalties. I'm telling you, it's a non-starter. The government doesn't allow you a deduction for bad behavior.

ballism
11-11-2010, 07:06 PM
I don't see the 'bad behavior' in those fines, nothing that IRS has any business of condemning. It's closer to a contract breach than 'bad behavior'. You are supposed to comply with NBA rules, you make a flagrant->you havent complied with your contract-> part of your pay (1-35k) is retracted.

Sure, NBA has a procedure that enables anyone to say 'but he gets paid full amount'. However in essence, whether you get paid and pay back due to a contract breach, or get less due to contract breach - it is just a technical difference.

I dont know how this will be solved in US, but it will be interesting to see. I have little clue about US legal system. So just saying what seems common sense to me. Law should be able to look beyong technicalities.

Eindar
11-11-2010, 07:26 PM
I don't see the 'bad behavior' in those fines, nothing that IRS has any business of condemning. It's closer to a contract breach than 'bad behavior'. You are supposed to comply with NBA rules, you make a flagrant->you havent complied with your contract-> part of your pay (1-35k) is retracted.

Sure, NBA has a procedure that enables anyone to say 'but he gets paid full amount'. However in essence, whether you get paid and pay back due to a contract breach, or get less due to contract breach - it is just a technical difference.

I dont know how this will be solved in US, but it will be interesting to see. I have little clue about US legal system. So just saying what seems common sense to me. Law should be able to look beyong technicalities.

It's not a technicality. Our tax law here states that "fines and penalties" are not deductible. The employer (NBA) says it's a fine. We also have many, many court cases revolving around form vs. function. If it's called a fine, and if it's being treated like a fine (as opposed to a suspension without pay), then it has the form of being fine, and so the tax law says it will be treated as a fine. Regardless, Lamar Odom has no chance of arguing this as a fine that should be allowable. To have any chance, he should say it's a charitable contribution, if indeed that money goes to charity in his name and not in the NBA's name or into the NBA coffers.

I think you can safely call me an subject matter expert on this particular topic. I don't like to talk about my personal life on here, so I'll leave it at that.

Kstat
11-11-2010, 07:37 PM
The fact he's doing all this without a lawyer just tells me he's really cheap.

speakout4
11-11-2010, 07:47 PM
I don't see the 'bad behavior' in those fines, nothing that IRS has any business of condemning. It's closer to a contract breach than 'bad behavior'. You are supposed to comply with NBA rules, you make a flagrant->you havent complied with your contract-> part of your pay (1-35k) is retracted.

Sure, NBA has a procedure that enables anyone to say 'but he gets paid full amount'. However in essence, whether you get paid and pay back due to a contract breach, or get less due to contract breach - it is just a technical difference.

I dont know how this will be solved in US, but it will be interesting to see. I have little clue about US legal system. So just saying what seems common sense to me. Law should be able to look beyong technicalities.
The nba treats it as punitive by making him pay and declaring for tax purposes the full amount. Otherwise I am going to see if I can deduct parking tickets.

King Tuts Tomb
11-11-2010, 07:53 PM
I think you can safely call me an subject matter expert on this particular topic. I don't like to talk about my personal life on here, so I'll leave it at that.

Are you Rasheed Wallace? Come on, tell us the truth.

ballism
11-11-2010, 08:19 PM
The nba treats it as punitive by making him pay and declaring for tax purposes the full amount. Otherwise I am going to see if I can deduct parking tickets.

He's already treated punitively by NBA, because he's paying the fines either way, the difference is whether he's also paying taxes for that amount or not. If you returned part of your pay due to doing a bad job (made lots of flagrants or talked at refs), do you still pay taxes for all of it? At least that's what deduction means where im from, correct me if I'm wrong.

speakout4
11-11-2010, 08:48 PM
He's already treated punitively by NBA, because he's paying the fines either way, the difference is whether he's also paying taxes for that amount or not. If you returned part of your pay due to doing a bad job (made lots of flagrants or talked at refs), do you still pay taxes for all of it? At least that's what deduction means where im from, correct me if I'm wrong.
Sure you do. That money was his but he through it away. His choice. Just as you pay taxes on money you are fined for parking, speeding, etc. Does Indiana give you a tax break because they took your fine money for speeding. There is a price for bad behavior which is not to be confused with bad performance.

ballism
11-11-2010, 09:19 PM
Sure you do. That money was his but he through it away. His choice. Just as you pay taxes on money you are fined for parking, speeding, etc. Does Indiana give you a tax break because they took your fine money for speeding. There is a price for bad behavior which is not to be confused with bad performance.

Your workplace doesn't write you speeding tickets. In fact, there's no bad behavior in raising hands in front of a referee. However, whining at officials or making hard fouls is bad for business, so not doing that is part of the job. In fact, it gets agreed to as part of the job every few years in CBA.

To take your speeding example, lets say you were a pizza delivery boy. And your contract included never driving over 30 miles per hour, because your employer thinks it's better for business when people always see you driving around in slow motion. And (as per your contract) you have to return part of your pay each time you drive over 30 miles per hour, even though it's completely legal. Is your income reduced by fines for bad behavior? Or is it a pay reduction because you aren't doing your job the way you agreed with your employer?

Now it's entirely possible that - as the person before you said - a fine is a fine in US tax law no matter the reasons and grounds. My point is that - when you look at it from a common sense pov - NBA fines are totally different from speed ticketing. In NBA, you essentially return part of your pay because you weren't doing your job the way you agreed.

speakout4
11-11-2010, 09:29 PM
Your workplace doesn't write you speeding tickets. In fact, there's no bad behavior in raising hands in front of a referee. However, whining at officials or making hard fouls is bad for business, so not doing that is part of the job. In fact, it gets agreed to as part of the job every few years in CBA.

To take your speeding example, lets say you were a pizza delivery boy. And your contract included never driving over 30 miles per hour, because your employer thinks it's better for business when people always see you driving around in slow motion. And (as per your contract) you have to return part of your pay each time you drive over 30 miles per hour, even though it's completely legal. Is your income reduced by fines for bad behavior? Or is it a pay reduction because you aren't doing your job the way you agreed with your employer?

Now it's entirely possible that - as the person before you said - a fine is a fine in US tax law no matter the reasons and grounds. My point is that - when you look at it from a common sense pov - NBA fines are totally different from speed ticketing. In NBA, you essentially return part of your pay because you weren't doing your job the way you agreed.
The nba is not your employer because they don't pay you. The team is your employer. The nba is bigger than your employer so it's not that you aren't doing your job properly but that you violated rules laid down by a police-type supervising entity. So it's more like speeding than not doing your job. Your employer still pays you the total salary but the nba not your employer takes your money. Your employer has still paid the total taxable amount, they didn't keep the fine.

ballism
11-11-2010, 09:54 PM
The nba is not your employer because they don't pay you. The team is your employer. The nba is bigger than your employer so it's not that you aren't doing your job properly but that you violated rules laid down by a police-type supervising entity. So it's more like speeding than not doing your job. Your employer still pays you the total salary but the nba not your employer takes your money. Your employer has still paid the total taxable amount, they didn't keep the fine.

NBA is enabled to do it by an agreement between players and their employers (CBA). The function of the NBA in this regard is to ensure that player-employer work relations are alike in all teams. For that, it is entitled to part of the profit that comes from the business.
It does not matter that NBA is 'big'. It is simply a superviser you and your employer agreed upon - through colective negotiations. You agreed that the superviser can suspend you from work without pay if you are breaching your bargaining agreement, or issue 'fines' where you have to return part of the pay. The superviser will spend those spare money on charity or whatever else helps to promote the image of the business.

Edit - Again, lets say pizza delivery boys and pizza shop agree to make me the supervisor and pay me for it. Lets say a few other shops reach similar agreements. My job is to supervise and spend the money i take back on charity under the name of that pizza shop network. I'm not a police. I'm part of a work agreement. Delivery boy isn't doing his job, I put an agreement in front of his nose and take back his salary.

It may seem a clumsy and even a bit 'hard to understand' system, but in fact it's how more and more businesses operate. If you take a look at fastest growing industries right now, it's exactly these type of 'delegated supervisors' that are among the top. Especially in the US. More and more companies are delegating their human resourses management - employment, supervision, training - to companies that focus on that specific job. It's easier and cheaper for a small company to handle human resourses when it delegates those problems to a 'big' company with good expertise. It may seem a bit clumsy looking from outside in, but it is way more efficient. It does not change the work relations between employee and employer however.

Future_NBA_Player
11-12-2010, 07:18 AM
Lamar, shouldnt you be helping your ugly wife loose weight, instead of doing this??? You need to get your priorities in line bud...

Eindar
11-12-2010, 07:33 AM
Are you Rasheed Wallace? Come on, tell us the truth.

Well, I guaransheed he's not getting out of those fines. Otherwise, both teams played hard, and Lamar needs to CTC.

ballism
11-12-2010, 08:53 AM
The funny thing in all of this is that in NBA, the worst misconducts like drugs, guns or violence are punished with suspension + reduced pay. While for minor things like flagrants or gestures you get fines. And then you go to IRS and noone cares about the money you lost by waving gun in locker room. But you pay taxes for flagrants. Seems like NBA should change the structure and naming of all these reductions/retractions a bit.

King Tuts Tomb
11-17-2010, 02:56 AM
Came across this reading Darryl Dawkins autobiography the other day:

"The maximum fine used to be $10,000, which not only was pocket-change to a player with a high-priced, long-term contract, but it was also a beneficial tax write-off."

Dawkins isn't the most trustworthy, though.