Athletes in Court

Lamar Odom Scores Victory in Tax Court

Posted in Basketball, NBA

Last year, Lamar Odom, 32 sued the IRS after being handed a whopper of a bill: $87,000 plus interest. The IRS slapped Odom with the bill after determining that he had no right to deduct $190,000 in personal fitness fees and various NBA-imposed fines from his 2007 tax return. Odom responded by arguing that the expenses were necessary to his career and thus properly deducted business expenses.

The case ended up settling with the IRS agreeing to take only $7,827 plus another $1,000 in interest. That represents a major victory for Odom as it amounts to only 10% of what the feds were initially seeking.

Much to the amazement of many, Odom initially handled the case himself and filed his response to the IRS without counsel. Odom showed some sense and eventually hired seasoned tax lawyer Robert T. Leonard in Los Angeles. In a recent article with Forbes, Leonard said that the IRS essentially gave up on the personal fitness charges as well as the league-fine deduction issues. Leonard said that the settlement figure actually related to a side matter, the disallowance of a deduction for Lakers tickets that Odom bought and gave out for promotional reasons.

Though decisions in Tax Court do not create binding precedent, other sports stars will likely follow Odom’s lead with regard to such deductions. Leonard mentioned that 2007 was not the first year Odom had much such deductions, instead it was just the first time such deductions were challenged.

Odom’s original suit against the IRS argued that rules preventing such deductions for physically fitness costs were outdated and unfair given that they helped advance his career and led to increased income.

In his Complaint, Odom wrote, that “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.” Concerning the league fines he deducted Odom argued that they were not criminal sanctions like traffic tickets which have long been held to be nondeductible. Instead, the fines were characterized as common practice in the NBA and merely “ordinary and necessary employee business expenses.”

The case was drawing close to trial when, last month, Odom’s attorney asked the Tax Court for a postponement to allow for negotiations with the IRS. The postponement was granted and a deal was brokered.

Odom has already paid the IRS and the issue has now been put to rest. Good thing given that Odom is reported to be making $8.9 million per season from the Dallas Mavericks. The year in question, 2007, Odom reported an adjusted gross income of $9.3 million. It’s tough to believe the Leonard said Odom already has written the check to the IRS. It wouldn’t be very hard for him. According to press reports, the Mavericks are paying him $8.9 million for the season. For 2007, the year his tax return was challenged, Odom reported an adjusted gross of income of $9.3 million. The $8,827 in IRS fines is likely too little to even be noticed.

Read:Lamar Odom Stuffs IRS In Tax Case Over Fines, Fitness Fees,” by William P. Barrett, published at Forbes.com.

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