SBD/March 18, 2011/Marketing and Sponsorship

Golfers Goosen And Garcia Battle IRS Over Endorsement Income

IRS' interest in Goosen (l) and Garcia could be precedent-setting case
Golfers Retief Goosen and Sergio Garcia are “waging a quiet battle with the IRS over endorsement income,” according to Peter Finch of GOLF WORLD. Tax lawyers said that these cases “will likely be precedent-setting and many more could follow.” The IRS claims that Goosen “owes nearly $165,000 in taxes and $33,000 in penalties” from ’02 and ’03. The IRS said that Garcia owes $1.72M in back taxes from ’03 and ’04. Tax collectors “have not hit Garcia with penalties for those years.” The IRS taxes international golfers’ endorsements income “based on how much they compete” in the U.S. If a non-American golfer plays 25% of his events in the U.S., the IRS “will tax a quarter of his endorsement income.” The central issue in the Garcia and Goosen cases is “how much of their endorsement income should be considered ‘personal services’ and how much is ‘royalties.’” Finch notes tax treaties between the U.S. and the U.K. (Goosen's home), and between the U.S. and Switzerland (Garcia's official residence), "do not tax royalty income, only personal services” (GOLF WORLD, 3/21 issue).
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