$8.9 million. That's what a Chicago jury agreed was the value of using Michael Jordan's name for a one-time spot in a magazine.
The decision came after an extensive lawsuit involving Dominick's Finer Foods, a Chicago-area grocery store chain owned by Safeway, Inc. The chain was in business for nearly 90 years before shuttering their last store in early 2014. A few years before those doors closed, Dominick's ran an unauthorized ad in Sports Illustrated congratulating Jordan on his Hall of Fame induction and offering diners $2 off of a steak dinner with the use of a coupon.
Jordan sued, claiming that his name was used in the ad without his permission. A judge agreed, holding Dominick's parent company, Safeway, liable for damages. The question of damages was put to a jury who had to decide the value of Jordan's name. Jordan's attorneys argued that the use of his name was worth $10 million while the Safeway's attorneys put the value at $126,900. Jurors agreed more with Jordan, awarding him $8.9 million.
Jordan said, after the verdict, "This shows I will protect my name to the fullest." Clearly.
Jordan's net worth is estimated by Forbes at $1.1 billion, putting him at #1741 on Forbes' billionaire list. That puts Jordan's multimillion dollar verdict in perspective: it represents less than 1% of his net worth. Jordan is well aware of this, saying the case "was never about money." He has pledged to donate the award to Chicago charities.
A donation of that size would normally cause problems for taxpayers like you and me. By law, the amount you can deduct for charitable contributions cannot be more than 50% of your adjusted gross income. That $8.9 million is a bit more than 50% of my AGI but not for Jordan. Forbes estimated that Jordan earned $100 million from Nike and other partners last year (that's more than Jordan's entire salary as a player during his 15 years in play). With those kinds of numbers, it's likely that a $8.9 million donation won't cause a problem. However, the 50% limitation is only one hurdle that high income taxpayers face when it comes to charitable donations.
For taxpayers who itemize their deductions, the Pease limitations, named after former Rep. Don Pease (D-OH) cap or phase out certain deductions for high income taxpayers. The Pease thresholds kick in at $309,900 for married taxpayers in 2015 which puts Jordan, like many other celebrities, over the limit. That means that Jordan's available itemized deductions will likely be reduced by the lesser of 3% of AGI above the applicable threshold or 80% of the amount of itemized deductions. Those Pease limitations apply to charitable donations, the home mortgage interest deduction, state and local tax deductions and miscellaneous itemized deductions. They do not apply to medical expenses, investment expenses, gambling losses (good for Jordan) and certain theft and casualty losses. Other limits can also apply to charitable deductions, depending on the organization and the nature of the assets (such as capital gain property).
So what can you learn from Michael Jordan? One, if you have an amazing fadeaway jump shot, you'll go far. Two, always protect your intellectual property. And finally, making a charitable donation is not only a chance to make a difference: it’s also an excellent way to reduce your tax burden for the year - even when you're a billionaire.
