IRS Chief Counsel - Amortization of baseball player contract, signing bonus 

October 2:  The IRS publicly posted a field advice memorandum* (prepared by attorneys in the IRS Office of Chief Counsel) concluding that a professional baseball team must amortize a signing bonus paid to its minor league players over the useful life of the player’s contract—here, over the seven-year term of the player’s contract. 20133901F (release date September 27, 2013, and dated August 26, 2013)

Read the IRS field advice memo [PDF 79 KB]

Field advice memo

The taxpayer operates a professional baseball team, and is affiliated with several minor league baseball teams.

When a player signs a contract to play for one of the taxpayer’s teams, a signing bonus may be paid. The taxpayer capitalizes and amortizes the signing bonuses of its major league players over the life of the players’ contracts. However, the taxpayer capitalizes and amortizes the signing bonuses of players that sign with the minor league teams over a period of years, based on the average of the actual life of the contracts (over a range of years).

Generally, under a uniform minor league contract, the player is bound to the organization for a period of seven years. If at the end of the seven-year period, the player has not entered into another contact with the same team, he becomes a free agent. It is at this point that the taxpayer no longer controls the player.

The IRS memo concludes that:

  • Because the taxpayer controls the player for the term of the contract, the useful life of the player contract is seven years.
  • The player bonus is thus amortizable over the seven-year period that the taxpayer has the right to receive services from the player.

*Chief Counsel Advice documents are legal advice, signed by executives in the National Office of the IRS Office of Chief Counsel and issued to IRS personnel who are national program executives and managers. The documents are issued to assist IRS personnel in administering their programs by providing authoritative legal opinions on certain matters, such as industry-wide issues. However, they are not to be used or cited as precedent.

©2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

Share this

Share this


Current and future KPMG clients may subscribe to TaxNewsFlash email alerts.

Email your contact information.

TaxNewsFlash-United States by year