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The Taxation of Royalty Payments to International Athletes

Michael J. Bruno, Steven Hadjilogiou, and Robert H. Moore

©2016. Published in Landslide, Vol. 9, No. 2, November/December 2016, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

In most athlete endorsement arrangements, an athlete will license to the endorsing company the rights to make use of the athlete’s name, image, voice, or likeness in various marketing materials, and the athlete will also promise to perform certain services to promote the endorsing brand, such as wearing the products of the endorser and making personal appearances at the endorser’s events or other industry-related events. When entering into these agreements, most athletes will receive either a lump-sum payment or be paid on an installment payment plan. The athlete may also receive bonus consideration for higher rankings or success at major events. Non-U.S. athletes (for U.S. federal income tax purposes, as defined below) face a larger-than-necessary U.S. tax bill if these payments are not properly allocated between the “services” component of the agreement and the “royalties” component of the agreement.

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