RICKY STILL OWES THE DOLPHINS $8.1 MILLION
Posted by Mike Florio on September 10, 2008, 9:01 a.m.
Dolphins running back Ricky Williams, who recently hammered out without an agent a contract that will pay him a salary of $730,000 in 2008 and $93,000 for each game in which he is on the active roster, still owes the team $8.1 million as a result of his abrupt retirement in 2004.
The issue of the pending judgment wasn’t addressed in the recent negotiations, according to Harvey Fialkov of the South Florida Sun-Sentinel.
“He never should’ve done an extension without them dealing with the judgment,” a source told Fialkov. “He could’ve leveraged that on becoming a free agent when people can make competitive bids on you.”
We disagree. If the Dolphins were to formally forgive a portion of the debt, the forgiven amount would count against the salary cap. More importantly for Williams, he most likely would have to treat the transaction as income, and pay taxes on it.
So if the Fins were to simply tell Williams right now that all is forgiven and forgotten, the Fins would have to show the $8.1 million against the 2008 cap, and Ricky would have to send a check to Uncle Sam somewhere in the neighborhood of $2.5 million.
(As some readers have pointed out, Williams would be entitled to a refund of his taxes if he pays back the money, since he already has paid taxes on the amounts that the Fins would be receiving. Nevertheless, the portion of the debt that he owes over and above any potential tax credit would still constitute income. So the check would be smaller than $2.5 million, but he’d still have to write one, and it wouldn’t be for $29.95.)
Our guess, then, is that the Dolphins will likely allow this thing to remain pending indefinitely, and never attempt to collect it. Ricky would never be able to pay it off, but he also would have a very hard time settling up with the tax man if the Fins ever tell him he won’t have to.
Either way, the Dolphins continue to possess the ultimate leverage over Williams. They can drive him into bankruptcy either by enforcing the debt, or by informing the IRS that they have written it off.
UPDATE: A league source with extensive experience navigating the salary cap tells us that the Dolphins would not take a cap hit for forgiving the debt; however, they won’t get a cap credit until the money is actually repaid. As to the tax implications, the issue is still unclear. On one hand, Williams owes a debt to the team, and forgiving that debt could amount to income. On the other hand, the debt is income on which taxes already have been paid.
http://www.profootballtalk.com/category/rumor-mill/
Posted by Mike Florio on September 10, 2008, 9:01 a.m.
Dolphins running back Ricky Williams, who recently hammered out without an agent a contract that will pay him a salary of $730,000 in 2008 and $93,000 for each game in which he is on the active roster, still owes the team $8.1 million as a result of his abrupt retirement in 2004.
The issue of the pending judgment wasn’t addressed in the recent negotiations, according to Harvey Fialkov of the South Florida Sun-Sentinel.
“He never should’ve done an extension without them dealing with the judgment,” a source told Fialkov. “He could’ve leveraged that on becoming a free agent when people can make competitive bids on you.”
We disagree. If the Dolphins were to formally forgive a portion of the debt, the forgiven amount would count against the salary cap. More importantly for Williams, he most likely would have to treat the transaction as income, and pay taxes on it.
So if the Fins were to simply tell Williams right now that all is forgiven and forgotten, the Fins would have to show the $8.1 million against the 2008 cap, and Ricky would have to send a check to Uncle Sam somewhere in the neighborhood of $2.5 million.
(As some readers have pointed out, Williams would be entitled to a refund of his taxes if he pays back the money, since he already has paid taxes on the amounts that the Fins would be receiving. Nevertheless, the portion of the debt that he owes over and above any potential tax credit would still constitute income. So the check would be smaller than $2.5 million, but he’d still have to write one, and it wouldn’t be for $29.95.)
Our guess, then, is that the Dolphins will likely allow this thing to remain pending indefinitely, and never attempt to collect it. Ricky would never be able to pay it off, but he also would have a very hard time settling up with the tax man if the Fins ever tell him he won’t have to.
Either way, the Dolphins continue to possess the ultimate leverage over Williams. They can drive him into bankruptcy either by enforcing the debt, or by informing the IRS that they have written it off.
UPDATE: A league source with extensive experience navigating the salary cap tells us that the Dolphins would not take a cap hit for forgiving the debt; however, they won’t get a cap credit until the money is actually repaid. As to the tax implications, the issue is still unclear. On one hand, Williams owes a debt to the team, and forgiving that debt could amount to income. On the other hand, the debt is income on which taxes already have been paid.
http://www.profootballtalk.com/category/rumor-mill/
