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THE TAX CONSEQUENCES OF BEING KICKED IN THE GROIN BY DENNIS RODMAN

December 01, 2003

Remember Dennis Rodman? Eugene Amos surely does. Mr. Amos suffered an unforgettable workplace injury at the hands - well, the foot - of "the Worm."

Mr. Amos was working the sidelines in Minneapolis as a television cameraman for a January 1997 visit by the world-champion Bulls. Mr. Rodman fell over the cameraman out-of-bounds and expressed his regret with a kick to Mr. Amos's nether region. Mr. Amos was removed on a stretcher.

Mr. Amos went directly to a hospital, where he demonstrated his mental toughness by contacting an attorney before leaving. Mr. Rodman quickly came to terms, agreeing to a $200,000 settlement six days after the game.

WAS IT PHYSICAL?

Mr. Amos excluded the $200,000 from gross income on his 1997 return on the grounds that it was compensation received "on account of personal physical injuries or physical sickness," which is tax-free under Code Sec. 104(a)(2). The IRS disagreed, saying Mr. Amos failed to demonstrate actual physical damage.

The settlement agreement was vague about whether the settlement was for physical damages. When a settlement doesn't clearly spell out what is being settled, the tax law looks to the "origin of the claim" to determine whether it qualifies for exclusion. Tax Court Judge Chiechi dodged the need to determine whether a kick in the groin by Mr. Rodman (6-6, 220 lbs.) was harmful, noting that as long as physical harm was the basis for the claim for damages, there was no need to prove that actual damage resulted. Ruling that the claim was primarily for physical damages, the court allowed Mr. Amos to exclude $120,000 of the award (T.C. Memo. 2003-329).

Oh, and the Bulls won, 112-102.

THE WORM TURNS?

Mr. Rodman received an 11-game suspension and a $25,000 fine from the NBA. Could Dennis qualify for a tax deduction for the league fine and settlement? We'll address that next time.

UPDATE: The tax consequences to Mr. Rodman are addressed here.

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