The decision Pete Carroll made in Super Bowl XLIX to pass the ball on second-and-goal rather than simply handing the loaf of bread to the man whose golden spikes would surely have tripped the light fantastic into the end zone and into the rarefied air inhaled by back-to-back Super Bowl winners has since gone down as one of the greatest errors in leadership judgment since The Charge of the Light Brigade.
But maybe we can get on to some of the finer points of the game’s aftermath, especially those that serve as more teachable moments for us in the financial services industry; like Tom Brady.
For the fourth time the C-3PO-like metallic surface of the Lombardi Trophy had on it the fingerprints of the quarterback who again demonstrated that whatever the circumstances he will not be denied an NFL championship by any team, except the New York Giants.
To no one’s surprise he was named the game’s MVP. To the surprise of most, including Malcolm Butler, he gave the $35,000 Chevrolet Colorado that came along with the ride to his defensive back – most suspect in appreciation for the interception that made everything possible.
All, including Butler, basked momentarily in Brady’s act of semi-random kindness before the technicians started pointing out that Uncle Sam and the IRS might have a thing or two to say that would let some of the air out of the otherwise joyful occasion.
If Brady accepted the truck before giving it to Butler he would have to report its value as income under IRC 74
Sitting in the highest bracket Brady would have owed over $15,000, to say nothing of any state or local taxes.
In addition, there are some gift tax issues
Even if Brady and spouse Gisele Bundchen decided to do some gift-splitting they might not muster enough $15,000 annual exemptions to avoid a tax. They could have covered the balance with part of their lifetime exemption amounts, but that involved filing a return and, besides, they needed it all just to cover what Gisele made that year!
So Chevrolet announced they would award the Colorado directly to Butler
Rather than getting an income tax-free gift from Brady, Malcolm had to report the truck as income. He made roughly 510-grand that year, plus endorsements, so he picked up the tab for $15,000.
What’s a mother to do?
Butler could have given the truck to the West Alabama Tiger Athletic Foundation and the whole thing would’ve been a wash. Or better, Brady should have just sucked up the income and gift tax and given the truck to Butler unfettered from all the concerns – after all, there is no denying Butler’s game-changing play resulted in a significant increase in Brady’s net worth.
Well, at least all the tax talk took the spotlight and its heat off Pete Carroll for a while.
Call us with questions your clients may have regarding the taxation of their intended transfer of property, particularly life insurance, annuities and pick-up trucks.