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Tax Court Settles Case Involving Professional Golfer: A Lesson in Sourcing of Endorsement Income

The U.S Tax Court recently decided Goosen v. Commissioner, 136 T.C. 27 (June 9, 2011), a case with potentially far-reaching implications for foreign athletes who compete within the United States.

In Goosen, the Tax Court examined the worldwide endorsement income earned by a nonresident professional golfer and held the following:  

• The taxpayer's income derived from contracts requiring him to use and wear a sponsor's products during tournament play is properly categorized as 50-percent personal services income and 50-percent royalty income.
• The taxpayer understated the amount of U.S.-source royalty income generated from the endorsement contracts
• A portion of the U.S.-source royalty income earned from the endorsement contracts was effectively connected with the taxpayer's U.S. trade or business of playing golf.

While this decision leaves some unanswered questions, it instantly becomes the leading authority for determining both the character and source of the endorsement income earned by international athletes.

 

For further information and tax advice please contact:

Anthony J. Nitti, CPA, MST, Partner
WithumSmith+Brown, PC
325 Main Street, 2nd Floor
Aspen, CO 81611,
Colorado, USA
Phone: 970-429-8074

 

 

 

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