Shohei Ohtani Signs $700 Million Deal with the Los Angeles Dodgers

Bobby Bonilla: Paving the Way

Before Shohei Ohtani made headlines with his historic deal, it was Bobby Bonilla who set the stage. Bonilla, a former Mets star who retired over two decades ago, received a giant check every year on what became known as “Bobby Bonilla Day.”

Ohtani’s Record-Breaking Deal

On Saturday, Ohtani shocked the sporting world by agreeing to a massive $10-year, $700 million deal with the Los Angeles Dodgers in free agency. This move brings an end to his time with the crosstown Angels.

Interesting Wrinkles in the Deal

While the Dodgers have yet to make an official announcement, there are some intriguing reported details about the contract. According to Fabian Ardaya of The Athletic, Ohtani will defer all but $2 million of his annual salary. This means that $68 million of his $70 million salary will be paid out at the end of his contract in 2034. The deferred $680 million will be paid without interest from 2034 to 2043.

Ohtani’s Proposal to Help the Dodgers

These deferrals were reportedly Ohtani’s suggestion as a way to assist the Dodgers in their future spending efforts. By deferring a significant portion of his salary, the team can allocate funds to other players, such as Mookie Betts and Freddie Freeman, and potentially pursue additional talent like Yoshinobu Yamamoto.

Navigating the Competitive Balance Tax

The deferrals will also benefit the Dodgers in managing the competitive balance tax, also known as the luxury tax. The expected average annual value (AAV) for CBT purposes is reported to be closer to $46 million per year, rather than the $70 million on the surface. This allows the team to stay within the tax thresholds and avoid additional financial penalties.

No Limitations on Deferred Compensation

Some may question the validity of Ohtani’s contract, but the answer appears to be a resounding no. The league’s latest collective-bargaining agreement explicitly states that there are no limitations on the amount or percentage of total compensation that can be deferred in a player’s contract. Ohtani’s staggering deferred figure falls within these guidelines.

A Tax Advantage

From a taxpayer’s perspective, the deferrals also offer Ohtani an advantage. If he is not residing in California when the deferred payments kick in, he will avoid the heavy state tax burden.

Read More of this Story at www.nbclosangeles.com – 2023-12-12 06:30:58

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