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You are here: Experts > Business > Corporate Law > Tax Law (Questions About Taxes) > Boxing sponsorships/endorsements
Expert: John Kirk, CPA
Date: 9/12/2008
Subject: Boxing sponsorships/endorsements
Question
I have a publicity firm and a large part of the duties of a publicist is obtaining
sponsorships for my clients. How are sponsorships tax-deductible and what
exceptions would there be to them being classified as such? Are they completely
tax-deductible or just partially, and what forms must you fill out at tax time to
qualify for the deduction?
Answer
It may be an advertising expense or a partnership depending on how the agreement is written.
In your situation you probably have a partnership where the net income is divided among the sponsors. Each sponsor puts up monies in a pooled fund from which the boxer's expenses are paid. These expenses are then deducted to arrive at the net income or loss after deducting expenses from winnings. Any distribution is first considered a return of sponsorship monies, and then capital gain on the excess.
Each sponsorship should be filed on form 1065.
Be careful in that the sponsorship makes a profit in three of any consecutive 5 years, otherwise it is a hobby and not entered into for profit.
John Kirk, CPA
www.johnkirkcpa.com
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