Honestly, sometimes the jokes just write themselves.
The much-anticipated 2020 Tokyo Olympics have come and gone. As usual, the quadrennial celebration of sport included a few surprises. For starters, there were no spectators in the audience. Gymnast Simone Biles withdrew from several marquee events with a case of the “twisties,” which seemed a perfectly reasonable alternative to paralyzing herself in a fall. And Belarusian sprinter Kristin Timanovskaya, who criticized her coaches on Instagram, defected to Poland mid-games after a couple of goons ominously hinted that refusing to return home right now might lead to her suicide.
In the end, Team USA brought home the most medals with 113. China and Japan followed with 88 and 58, respectively. The event hasn’t (yet) turned into the Covid superspreader some people thought it might. The big loser will likely be the host city of Tokyo, which loses out on tourist revenue from thousands of fans who would have traveled to support their athletes. Will the world be ready to reconvene in Beijing in six months for curling, biathlon, and skeleton? Magic 8-Ball says “Better not tell you now”!
So what do the sports fans at the IRS think of the whole spectacle?
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But there’s one “payfor” that threatened to derail the bill like a train plunging through a decrepit bridge. Specifically, lawmakers squabbled over a proposal to raise $28 billion over ten years by requiring cryptocurrency exchanges to report transactions to the IRS as stockbrokers have done for decades.
The US Olympic Committee pays winning athletes $37,500 for gold, $22,500 for silver, and $15,000 for bronze. The Olympians and Paralympians Act of 2016 excludes those prizes from taxable income unless you’re already earning over $1 million. (This means the entire men’s basketball team, each of whom play for the NBA, loses out on the break.) Winners may still owe state taxes, which seems unfair considering Kevin Durant brought home the gold for Team USA, not Team California.
Those prizes pale compared to what some other countries pay. Singapore dangled $737,000 to bring home a gold, $369,000 for a silver, and $184,000 for a bronze. Sadly, none of the city-state’s 23 athletes medaled at all. Kazakhstan offered athletes up to $250,000 to make benefit glorious nation of Khazakhstan, which is probably more than anyone besides Borat can spend there. The country sent 83 athletes to the games and won just eight medals — all bronze.
But wait, there’s more! Of course, the real money comes down the road, from endorsements. Swimmer Katie Ledecky came into this years’ contest with seven medals and $3 million worth of annual endorsements with Adidas, Reese’s, and Ralph Lauren. She won two more golds and beat a woman on a jet-ski. Soccer stars Alex Morgan and Megan Rapinoe each earned over $4 million last year from multiple sponsors. Those endorsements are all taxable as ordinary income at rates up to 37%.
Finally, Simone Biles still sports $5 million/year in endorsements from a dozen different sponsors including VISA, Core Power fitness shakes, and even Oreos. (They’re vegan!) This despite bringing home “just” a silver and a bronze, which is more than any of her critics have ever done. The fans at the IRS will be glad to know that putting her safety over her medals won’t cost Biles some more tangible gold.
Speaking of bringing home the gold, our event is Tax Planning. Unfortunately, the Olympic Committee ruled us too professional to compete, which means we probably have to settle for coaching. Seriously, though, you don’t want to leave your taxes up to an amateur — which is why you should call us with your questions!
Tax Beat is a weekly column with a unique angle: making taxes entertaining. Every week Ed explores the humorous aspects of taxes and current events.
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