Bringing Home the Gold

8/1/2012

Friday marked the Opening Ceremonies of the Games of the XXX Olympiad, and the world’s eyes are waiting to see who takes home the gold. Whoever takes it home for the United States, you know the IRS will be there to help them count it! The United States Olympic Committee – the nonprofit organization that coordinates U.S. Olympic efforts – awards cash prizes to U.S. medalists. The prizes are $25,000 for each Gold medal, $15,000 for each Silver, and $10,000 for each Bronze, and this income is taxable. Although the IRS isn’t taxing Olympiads on their medals – at least, not yet – believe it or not, there is an argument to be made that medals are taxable. Way back in 1969, the Ninth Circuit Court of Appeals ruled that shortstop Maury Wills owed tax on the $10,000 value of the Hickock Belt he received for being named Athlete of the Year.
 

But the IRS knows the real payoff doesn’t come from the medal itself, but rather from endorsement deals the stars make. Take swimmer Ryan Lochte, for example. On Saturday, he dethroned Michael Phelps as king of the men’s 400 meter individual medley. Lochte had already appeared in commercials for Nissan, AT&T, Gatorade, and Gillette before the games had even begun. Fortune magazine estimates he’ll make $2.3 million this year, before any bonuses he receives for actually bringing home an Olympic medal. Bloomberg Business Week guesses that Phelps made $6 million in 2010. With possibilities like that, you can be sure the IRS will be paying attention during Thursday’s 200 meter individual medley.
 

Olympic fame and fortune can pay financial dividends for decades to come. Many former Olympians go on to succeed with other athletic and media pursuits. Thirty–six years ago, a determined American athlete named Bruce Jenner became a national hero, setting a new Olympic record while winning the gold in the decathlon. Three decades later, he continues to be a part of the national spotlight, starring alongside his stepdaughters, the Kardashian sisters, on a reality television show. We realize that few of you are reading these words from Olympic Village in London’s East End. But it’s important to plan ahead and make sure you understand your tax obligations if you are lucky enough to win any special prizes in your lifetime!