What's in a Name?


For those of you who aren't in the loop, this is every sports fan's favorite time of year. Baseball fans are watching pennant races heat up; football fans are watching fresh NFL talent kick off the new season; and tennis fans are taking in the excitement of the annual U.S. Open. So, naturally, this means we're going to talk about basketball.

In Shakespeare's archetypal tragedy Romeo and Juliet, the star-crossed lovers bemoan the feud between their families that keeps them apart. In Act II, Scene II, Juliet gazes out her window and wonders, "What's in a name?" The answer, according to a Chicago jury, is $8.9 million tax-deductible dollars!

Dominick's Finer Foods was once a Chicago-area grocery store chain that wound up closing its doors after an ill-fated acquisition by fellow supermarket chain, Safeway. But, back in 2009, before Safeway's takeover, Dominick's took out an advertisement in an issue of Sports Illustrated to congratulate Chicago Bulls basketball legend Michael Jordan on his induction into the NBA Hall of Fame. The ad read, "Congratulations, Michael Jordan, you are a cut above, " and included a coupon for $2 off on steaks.

A lesser athlete might have just been flattered… But Air Jordan isn't just the most accomplished basketball player of all time; he's also the most effectively marketed b-ball player ever. (Forbes magazine estimates his net worth at $1.1 billion, and reports he earned more than $100 million from Nike just last year.) And maintaining this type of good marketing means protecting your good name. So MJ did the same thing any athlete accused of, say, using deflated footballs would do: He filed a lawsuit, claiming Dominick's had used his name without permission.

The jury agreed that Dominick's had fouled Jordan, which left them with the challenge of deciding how much that foul had cost him — in other words, they had to determine just how much Jordan's name was worth. Jordan lined up for $10 million, while Dominick's attorneys blocked with $126,900. The jury clearly thought the supermarket's name misuse was more than just a technical, and proceeded to award the basketball legend $8.9 million.

Here's where the IRS comes in: they don't! $8.9 million is probably real money to you, but it's pocket change for a billionaire like Jordan. So "His Airness" declared, even before his lawyers laced up their wingtips, that he would donate any award he received to local charities.

Even better for Jordan is that he makes enough money to dribble around one important limit on charitable gifts: Code Section 170(b)(1)(A). While this IRS code section does limit gifts to 50% of your adjusted gross income, it also lets any excess gift amount "travel" forward for up to five years. So, as far as the IRS is concerned, it's a free throw for Jordan.

Here's the lesson for us: It's not just how you make your money, or even how much of it you make; it's also when you make it. Choices like timing business or bonus income, deferring tax on retirement savings, and deciding when to recognize investment winners and losers all play a part in your overall game plan. But if you don't have a plan, you won't know when to lay up, or when to go for a three-pointer. So call us when you're ready for a plan, and let us help you take it down the lane and past the IRS guards!