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.




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