Willing to trade for Ohtani?

[calsnowskier]

And this is what makes me think that Ohtani had come to a decision very early in the recruitment process. To put something of this magnitude and complexity together doesn't happen overnight. The Dodgers woild have to have ample time to actually pull the pieces together and Othani would need time to review it. Not sure how something like this could be done in a week

And the 700M number is a gross misnomer. It is really something like 460M. The extra 240M is just interest earned on the deferments. That’s why their tax hit is only approx 46M per season.

The doggies got him for considerably less than the estimated 500M contract he was expected to receive.

He wanted to go to the doggies, and he gave them a moderate discount to make it happen. The Giants were never in play.

 

[LHG]

And this is what makes me think that Ohtani had come to a decision very early in the recruitment process. To put something of this magnitude and complexity together doesn't happen overnight. The Dodgers woild have to have ample time to actually pull the pieces together and Othani would need time to review it. Not sure how something like this could be done in a week

The rumor I read is that Ohtani offered this kind of deferral deal with all teams he negotiated with. I would guess that the Dodgers offered him the most in deferred money and are also perennial contenders. But, yes, this was probably talked about for a while.

 

[LHG]

And the 700M number is a gross misnomer. It is really something like 460M. The extra 240M is just interest earned on the deferments. That’s why their tax hit is only approx 46M per season.

The doggies got him for considerably less than the estimated 500M contract he was expected to receive.

He wanted to go to the doggies, and he gave them a moderate discount to make it happen. The Giants were never in play.

Don't know if I would agree with that. The wording I've seen is that the deferred money is interest free. The reason that the luxury tax amount is 46 million has something to do with the length of deferrals. Essentially, if I understand it correctly, that amount is the average amount per year, based on the length of the contract plus the length of deferrals.

 

[tzill]

Ohtani to defer $68 million per year in arrangement with Dodgers

The structure is intended to provide the Dodgers additional cash flow and payroll flexibility.

theathletic.com

According to this from The Athletic, aside from the deferred income, estimates are that Ohtani makes about $50 million per year in endorsements. I also read that the Dodgers think they will recoup this investment within a few years from increased ticket revenues, TV revenues, and merch sales.

I have always wondered about this in other sports (Warriors?). Why does Curry need to be paid $50 million per season when his endorsement income may be close to that anyway? Especially when it impacts the team's ability to afford other high caliber players?

I believe it was one of the Pirate players back in the 80's (Bonilla) who signed with the Mutts and was given a contract that paid him $1 million a year for 25 years, and a few years ago was the last payment made to him.

This thing with Ohtani sure seems like skirting the rules, if not in specifics then in spirit. But hey, they were creative. And our Neanderthal front office cannot even find the freaking box to think outside of.

I get SO's decision though. After all the years in the Siberia that is the Angels, he wanted to win now. And there is no team better equipped to do that than the Dogs. Alas, the Giants are not in that category.

Good questions, and there is some nuance here:

1. I'm sure the doyers will recoup what they are being charged against the luxury tax (estimates are something like $45M a year).
2. Re: Curry (or any other max contract NBA guy) -- almost always they have to sign for the max as the NBAPA pushes them to do so. Once in a while a player will take a little less to allow team building but it's fairly uncommon and the union does not like it.
3. Re: Bobby Bo -- December 1 is Bobby Bo day. He gets his $1M every year, for at least a few more years I think.
4. Generally speaking, a players contract is evenly split over the years of it. That is, a 6/60 contract is counted against the luxury tax as 6 payments of $10M, even if the contract is back loaded or front loaded. I was unaware until this week that any team could do what the doyers have done. It is allowed by the CBA, and really smart lawyers for the doyers and MLB say it's legit. I strongly suspect the owners will push to take that away with the next CBA. The players will negotiate against it of course as it will depress future massive contracts.
5. I liken this to the Kevin Durant deal with the Ws. It was a one-time spike in the cap and some pretty crafty maneuvering to get just underneath it to get KD. I loved it then; I don't feel I can complain about the phuking doyers now.

 

[calsnowskier]

Don't know if I would agree with that. The wording I've seen is that the deferred money is interest free. The reason that the luxury tax amount is 46 million has something to do with the length of deferrals. Essentially, if I understand it correctly, that amount is the average amount per year, based on the length of the contract plus the length of deferrals.

I think the difference is just semantics.

This is essentially the Bonilla deal. He had something like 8M left on his contract. He renegotiated to make that 8M deferred, at something like 8% interest, compounded annually, with about 15 years before the first installments were to be paid.

It was a nice investment for Bonilla, but it wasn’t anything as bad as the dumb shits in the media make it out to be ever year when he gets his check.

 

[calsnowskier]

Good questions, and there is some nuance here:

1. I'm sure the doyers will recoup what they are being charged against the luxury tax (estimates are something like $45M a year).
2. Re: Curry (or any other max contract NBA guy) -- almost always they have to sign for the max as the NBAPA pushes them to do so. Once in a while a player will take a little less to allow team building but it's fairly uncommon and the union does not like it.
3. Re: Bobby Bo -- December 1 is Bobby Bo day. He gets his $1M every year, for at least a few more years I think.
4. Generally speaking, a players contract is evenly split over the years of it. That is, a 6/60 contract is counted against the luxury tax as 6 payments of $10M, even if the contract is back loaded or front loaded. I was unaware until this week that any team could do what the doyers have done. It is allowed by the CBA, and really smart lawyers for the doyers and MLB say it's legit. I strongly suspect the owners will push to take that away with the next CBA. The players will negotiate against it of course as it will depress future massive contracts.
5. I liken this to the Kevin Durant deal with the Ws. It was a one-time spike in the cap and some pretty crafty maneuvering to get just underneath it to get KD. I loved it then; I don't feel I can complain about the phuking doyers now.

Fuck that.

You can ALWAYS complain about the “phuking doyers”.

 

[tzill]

Not sure if I agree completely with this article but an interesting take on the deferred money nonetheless.

Why Shohei Ohtani's Contract Structure Is Not A Luxury Tax Dodge

Earlier today, we learned that Shohei Ohtani's $700MM contract with the Dodgers has a stunning deferral structure: he'll earn a …

www.mlbtraderumors.com

It's a pretty sound and logical article. I agree that deferment won't likely be a very big issue for the next CBA. It's just such a small percentage of contracts that utilize it.

 

[tzill]

Don't know if I would agree with that. The wording I've seen is that the deferred money is interest free. The reason that the luxury tax amount is 46 million has something to do with the length of deferrals. Essentially, if I understand it correctly, that amount is the average amount per year, based on the length of the contract plus the length of deferrals.

Essentially correct. It's the present value of future money. That's how it's calculated. $70 down the road is worth $46 today.

 

[tzill]

Per Baggs, we matched the Doyer offer for Ohtani. Ohtani picked LA.

I can't be upset with FZ here. They weren't outspent.

 

[calsnowskier]

Per Baggs, we matched the Doyer offer for Ohtani. Ohtani picked LA.

I can't be upset with FZ here. They weren't outspent.

He just didn’t like FZ’s ugly face…

 

[tzill]

https://x.com/extrabaggs/status/1734726437876474082?s=10

Ohtani camp presented Giants the exact deal that Ohtani ended up finalizing with LA. "We were agreeable to it," Zaidi said. Then Giants were told it was in Ohtani's hands. Obviously, Shohei picked Dodgers.

 

[LHG]

https://x.com/extrabaggs/status/1734726437876474082?s=10

Ohtani camp presented Giants the exact deal that Ohtani ended up finalizing with LA. "We were agreeable to it," Zaidi said. Then Giants were told it was in Ohtani's hands. Obviously, Shohei picked Dodgers.

I heard that he offered the same kind of deal with all teams he was negotiating. I won't doubt that FZ matched the Dodgers' amount. However, I think he would have had to significantly increase the amount but, with numbers at this stratosphere and the amount being deferred, I don't think that would have made a difference. He saw a clearer path to championships in LA and decided on them.

 

[Hangman]

Just as I feared, offered the same deal to him as the Dodgers and he stayed down south. Get more in AD revenue and he didnt need to find a new house. Its just crazy expensive to move to the Bay Area and getting taxed in California

 

[LHG]

Anyone read the article in the Atlantic about Ohtani's contract being explained? I heard that they explain that part of the reason for the deferrals is to avoid state taxes on a large portion of the money. I'm not a tax expert but I thought that it doesn't matter where he is when he receives the money, it is the source of the income that determines which state will tax it.
I don't have an account with The Atlantic (and don't plan on getting one). Just curious if anyone read it and if it really makes that point.

 

[tzill]

Anyone read the article in the Atlantic about Ohtani's contract being explained? I heard that they explain that part of the reason for the deferrals is to avoid state taxes on a large portion of the money. I'm not a tax expert but I thought that it doesn't matter where he is when he receives the money, it is the source of the income that determines which state will tax it.
I don't have an account with The Atlantic (and don't plan on getting one). Just curious if anyone read it and if it really makes that point.

Ahem....

He will be subject to CA state tax as long as the Doyers are in LA. He defers money and the tax on it. Interestingly, he'll be subject to more CA tax on the deferral money than he would be if it were paid while an active player. It's complicated but the salary is prorated per game and sourced to the state where he plays that game. I've actually done a fair amount of these cases (mostly Hockey, but I do have a client who appeared against us in the 2002 WS as well). So, if he were paid $70M in 2024, about 65% would be in CA (LA, SF, SD...not sure if they play OAK). If he takes $68M after retirement, then all of it would be CA taxable.

Thanks for coming to my TED tax attorney talk.

 

[LHG]

Ahem....

He will be subject to CA state tax as long as the Doyers are in LA. He defers money and the tax on it. Interestingly, he'll be subject to more CA tax on the deferral money than he would be if it were paid while an active player. It's complicated but the salary is prorated per game and sourced to the state where he plays that game. I've actually done a fair amount of these cases (mostly Hockey, but I do have a client who appeared against us in the 2002 WS as well). So, if he were paid $70M in 2024, about 65% would be in CA (LA, SF, SD...not sure if they play OAK). If he takes $68M after retirement, then all of it would be CA taxable.

Thanks for coming to my TED tax attorney talk.

I assumed that to be the case. That is why I was so interested to see what was in that article published by the Atlantic. It may be that someone got a very wrong interpretation after reading it.

 

[tzill]

I assumed that to be the case. That is why I was so interested to see what was in that article published by the Atlantic. It may be that someone got a very wrong interpretation after reading it.

I read the article, it didn't go into CA taxation.

(nor should anyone who isn't getting paid to do so)

 

[LHG]

I read the article, it didn't go into CA taxation.

(nor should anyone who isn't getting paid to do so)

Interesting. Then that person who I read say that it did was talking out of his/her butt.

 

[tzill]

Interesting. Then that person who I read say that it did was talking out of his/her butt.

Maybe I'm thinking of a different article??

 

[LHG]

Maybe I'm thinking of a different article??

Here is the article in question - Shohei Ohtani’s massive deferrals, Dodgers contract explained
And what I read online about this article - "Ohtani will receive $2M/year for ten years, then $68M/year for the next ten. This both allows Ohtani to potentially avoid paying California’s high income taxes and frees up money for the Dodgers to pay other players in the near term."