Question

In 2007 Tiger Woods agreed to a cover shot, photo spread, and interview with Men’s Fitnessmagazine in exchange for a sister publication’s agreement to forbear publishing an article alleging an extramarital affair involving woods. The sister publication, the National Enquirer, had informed Wood’s representative that it had photographic evidence of the golfer having an affair. This agreement was heavily negotiated over several weeks and ultimately formalized into a written document. The article was published in the August 2007 issue of Men’s Fitness. Does Woods have income that he must recognize from this transaction? How would the amount of income be determined?Will Woods receive a deduction for this transaction? How would the amount of the deduction be determined?

Answer 1

In short, the flow of financial sources requires the recognition of income, regardless of when the cash is paid and what type of financial resource it is. Financial resources include cash itself, claims to cash, or goods and services. In this case, Tiger is exchanging goods and services to Men's Fitness to ensure his personal protection from the National Inquirer. Therefore, Woods does have income that he must recognize from this transaction. For future scenarios, it's essential to be familiar with the criteria used for recognizing income. For income to be recognized, evidence of an arrangement must exist (in this case it would be the agreement Woods had with National Enquirer to forgo publishing information about his affair in exchange for interviewing with Men's Fitness), delivery must have occurred or services been rendered (if he follows through with the agreement), the seller’s price to the buyer must be fixed or determinable (Men's Fitness would have to establish a consistent amount they would be paying Woods), and collectability should be reasonably assured (the legitimacy of this transaction should be confirmed).