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Manny Pacquiao's $20M Victory Over Bradley Is Big Win For IRS Too
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Manny Pacquiao's $20M Victory Over Bradley Is Big Win For IRS Too

Apr 13 2014, 3:32pm CDT | by

Manny Pacquiao’s Dominating Win Over Timothy Bradley earned him $20 million. That brings his career earnings above $300 million. But some of the money is clearly going to pay taxes in his long...

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14 weeks ago

Manny Pacquiao's $20M Victory Over Bradley Is Big Win For IRS Too

Apr 13 2014, 3:32pm CDT | by

Manny Pacquiao’s Dominating Win Over Timothy Bradley earned him $20 million. That brings his career earnings above $300 million. But some of the money is clearly going to pay taxes in his long brewing two-country tax flap. And given that this fight was in Las Vegas, the IRS has the upper hand.

Notably, Mr. Pacquiao is neither a U.S. resident nor a citizen. All of us on tax day know painfully well that Americans pay taxes on their worldwide income. But as a nonresident alien, Pacquiao doesn’t pay U.S. taxes on monies he earns elsewhere. Of course, Mr. Pacquiao’s big paydays and 14 fights were in the U.S.

Then, in early 2013, his adviser Michael Koncz sparked controversy by stating that Mr. Pacquiao would likely avoid fighting in the U.S. in the future. After all, our 39.6% rate is hard to swallow. All else being equal, fighting outside the U.S. in lower tax rate countries made sense. Yet return he did, and his $20 million guarantee for facing Timothy Bradley was a big win, in cash and otherwise.

Foreign athletes must file U.S. income tax returns and face special withholding rules  so they don’t just pocket the money and run. They generally must pay U.S. income tax on their U.S.-source income. Earnings in Vegas? Clearly, that’s all taxed by the IRS.

But in other matters, what is considered U.S.-source can be debated. It includes pay for performances, endorsements, merchandise sales, and royalty or other income closely related to the event. And big money can turn on exactly how the “Hollywood Accounting” is done.

The IRS has a special program  targeting foreign athletes and entertainers. Depending on an athlete’s home country, treaty benefits may apply. Yet disputes are common about how much income to allocate to particular countries and where endorsement earnings should be taxed. The U.S. Tax Court has often heard athlete tax disputes over promotional income, intellectual property and more.

Mr. Pacquiao’s taxes are controversial with the IRS and with the counterpart Philippines Bureau of Internal Revenue. The versatile boxer is also a lawmaker in the Philippines, yet tax authorities there long clamored for his U.S. tax records. Exactly what does he pay where, and how does he divvy it all up?

For a time, his promoter, Top Rank Inc., evidently submitted correspondence to the Philippines tax man showing that he did pay U.S. taxes via withholding. But the official IRS documents to confirm it were long debated. Some reports say that in all, he owes as much as $50 million. 

Pacquiao’s advisor, Mr. Michael Koncz, says Pacquiao’s financial situation in the Philippines may be more politics than anything. Mr. Koncz has said that tax deductions are at the center of the tax disputes. Mr. Pacquiao is famously charitable.

Pacquiao’s tax attorneys are said to be working on the case, and Mr. Koncz says it’s going well. But the IRS is famously sticky, and U.S. charitable contribution rules are rigid. Mr. Koncz has expressed concern over Mr. Pacquiao’s generosity with fellow Filipinos.

There are past liabilities for Philippine taxes and past liabilities to the IRS, once those are finally ironed out in court or otherwise. Clearly too, Mr. Pacquiao will owe current taxes to the IRS on his recent earnings. But the feisty boxer is already looking ahead. He noted after his Bradley fight that he thinks he can fight for two more years.

Perhaps he will face Juan Manuel Marquez or Mike Alvarado, who are scheduled to face off May 17th.  The IRS will be watching.

You can reach me at Wood@WoodLLP.com . This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.

 
Update
10

6 weeks ago

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Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

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KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was told today ...
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Update
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6 weeks ago

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6 weeks ago

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KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan Rakyat toda ...
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Update
7

6 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Ministe ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

6 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

INDIA-CHINA-DIPLOMACY-TRADE
PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Sela ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

6 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

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KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

6 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Mi ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

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JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involv ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

EurAsia Cup presented by DRB-HICOM - Day One
PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar S ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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