A Super Bowl win and a free truck? Tom Brady has a lot to celebrate. In fact, he's so happy he may even give his new truck to a teammate. The catch? Something he may not celebrate is the tax bill to follow.
What did you think of this year's Super Bowl? If you didn't catch the big game, let me fill you in.
Seattle had the ball with a few seconds left and needed only to run the ball a couple of yards to enter the end zone, win the game and make history. Despite having one of the best running backs in football, Seattle chose to pass in a much criticized play.
The result of the play was an interception by a "Cinderella story" defensive back and a victory for the New England Patriots.
Patriots quarterback, Tom Brady, was awarded the MVP trophy for the game. Along with the honor, Brady won a new truck. It turns out, however, that Brady will have to pay income and gift tax on truck.
This tale is told in a recent Forbes article titled "IRS Is Coming After Tom Brady's Super Bowl MVP Truck".
The truck is considered a taxable prize, thus Brady has to pay income tax on it. Fair enough.
Yet Brady has also stated that he is going to give the truck to teammate Malcom Butler who made the interception to seal the victory.
Because the truck is worth more than the yearly individual gift tax exemption (i.e., $14,000), Brady will have to also pay the gift tax on the truck if he follows through with his announced intentions. Butler, however, will not have to pay tax on the truck as there are no gift tax consequences for the recipients of gifts.
Fortunately, Brady will be able to lessen the gift tax bite if he and his supermodel wife engage in "gift splitting" to permit her individual gift tax exemption to be applied against the value of the gift.
Before making any sizeable gifts, be sure to consult with an experienced estate planning attorney.