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Thread: [Extended] Frank Vatrano

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    Default [Extended] Frank Vatrano

    https://x.com/PierreVLeBrun/status/1...z2fOJcYyQ&s=19

    Frank Vatrano’s 3-year, $18M extension is an interesting one. He will get paid $3M a year in base salary but then $9M in deferred salary. Starting 10 years from now in 2035, will make $900,000 a year for 10 years, and his plan is to live outside of California (and its tax system) at that point in retirement. Ducks, meanwhile, benefit with deferred payments by having $4.57M AAV (instead of $6M AAV) on the deal. Creative way for both the team and player to make it work. And perhaps show other players in future way to stick-handle around California tax issue.
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    Default Re: [Extended] Frank Vatrano

    https://x.com/FriedgeHNIC/status/187...XQYWw1SPw&s=19

    It’s $18M, but an AAV of $4.57M, because of $9M in deferred salary.
    In 2035, he will make $900K/year for 10 years.
    Like Ohtani, he will live outside of California and be able to pay less tax on that deferred cash
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    Keep 20/25 at seasons end, Cut 5 to FA for redrafting
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    G- Vasilevskiy, Oettinger, Blackwood

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    Default Re: [Extended] Frank Vatrano

    "creative" and "tax maneuver" rarely go well together for the tax payer.
    This will be an interesting case to follow as the precedent for all other team sport athletes will be significant either way.
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    Default Re: [Extended] Frank Vatrano

    Yeah this is going to end up with reports of tax evasion in a few years and either they will be paying a huge fine or possibly jail time.

    No way this will go allowed long term. Announcing he will purposely leave the district is intent.

    Just saying but besides that super smart future plan for this guy. Making 900k for 10 yrs through retirement not bad
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    Default Re: [Extended] Frank Vatrano

    A few MLB players (or, rather, their agents) have structured their contracts this way (which are considerably larger amounts than what Vatrano is going to earn) over the past couple of years in California and, if IIRC, the State has tried rewriting their tax code to combat it but came up against constitutional constraints with respect to sweeping tax reforms.

    I'm sure they will eventually succeed in implementing changes to their tax code, but it will likely worsen the already bloated socio-economic challenges the state has been grappling with for over a decade now, prompting more and more individuals of value to relocate to states with more sensible policies.
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    Default Re: [Extended] Frank Vatrano

    This is likely bad financial planning for Vatrano. The time value of money means that he is likely going to be worse off with this structure than he would getting the money up front. Although, I doubt Anaheim would be willing to pay him $6M per season so maybe this was the best way to get the most guaranteed money possible.

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    Default Re: [Extended] Frank Vatrano

    Quote Originally Posted by chuckcouples View Post
    This is likely bad financial planning for Vatrano. The time value of money means that he is likely going to be worse off with this structure than he would getting the money up front. Although, I doubt Anaheim would be willing to pay him $6M per season so maybe this was the best way to get the most guaranteed money possible.
    agreed!
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    Default Re: [Extended] Frank Vatrano

    So, after some reading, its possible this works out ok for Vatrano. My understand is these deals are drafted specifically with intent of avoiding California STATE taxes (currently up to 14.4%!). If properly drafted (requirements are equal payments over 10+ years) these deferred payments can be classified as “retirement payments” under Federal Tax Law and under Federal Tax Law retirement payments CANNOT be taxed by a state if the receiver is not a resident of the state.

    So, the player retires and the payments start, assuming the player ceases to be a resident of California by the time the payments kick in (move to Florida or Texas) they will go from paying 14.4% to 0% state tax on this income.
    The risks of this strategy include: California attempting to change state law and/or have federal law reformed to change the rules, the employer holds the cash so if they cease to exist the money is lost (less concerning for say, the Dodgers, Ducks should be safe as well), and the time value of money diminishing the payment's value.

    Analysis of Ohtani's contract (also California)
    https://abovethelaw.com/2024/01/shoh...te-tax-secret/
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