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NBA Player Settles with IRS over Deductions for Fitness Fees and Fines

January 3rd, 2012 No comments

Last year, NBA player Lamar Odom challenged an $87,000 IRS bill. At issue was whether Odom could deduct on his 2007 income tax return $190,000 in personal fitness fees and NBA-imposed fines.

via Wikipedia (before his trade to the Dallas Mavericks)

Forbes is reporting that Odom settled the matter with the IRS last month. Odom’s attorney Robert Leonard claims Odom ended up paying $7,827 plus interest. Not a bad result considering the IRS was seeking $87,000.

The purported basis for the deductions is section 162(a) of the Internal Revenue Code, which permits a taxpayer to deduct “ordinary and necessary” expenses paid or incurred in carrying on any trade or business.

One should note that this settlement does not set any legal precedent. In other words, one cannot solely rely on news of this settlement to justify these deductions on a tax return. After all, deductions for league-imposed fines have generally been disallowed. Perhaps the IRS is shifting its stance on the issue, perhaps not.

Of course, a good accountant should tell his impacted clients about it, so then they could make an informed decision together. The informed decision should rest on whether the expenses in question are both “ordinary” and “necessary” to the taxpayer’s trade. Odom’s attorney argued that his client’s expenses were, because the player contract required Odom to “be in sufficient physical condition that allows him to perform as a professional basketball player throughout the basketball season.”

We don’t know whether Odom’s personal fitness activities in question were the kind to render him in NBA shape. If those activities resembled anything similar to those Odom now endures as a member of the Dallas Mavericks, his argument was probably compelling.

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