Double Taxation: A Take On All Things Taxes

Tax Court Settles Case Involving Professional Golfer; Offers Lesson in Sourcing of Endorsement Income

Two-time major winner Retief Goosen, affectionately known as “Goose” or “Iceman” in golfing circles, found his way onto the Tax Court docket today. Goosen, a resident of the UK, continues to golf on both the European and the PGA Tour, subjecting him to US tax on the income earned and sourced to the United States. At issue in Goosen v. Commissioner, 136 T.C. 27 (6.9.2011), was not the golfer’s winnings on the tour, but rather whether Goosen’s considerable endorsement revenue:

 1. Constituted personal service income or royalty income for US tax purposes, and

2. Represents income effectively connected with a US trade or business (taxed in the US at graduated rates) or fixed and periodic income (taxed at a flat 30%.)

During the years at issue, Goosen had the following endorsement contracts:





Upper deck

EA Sports

This was a lengthy case, so rather than go into great detail regarding the respective positions of Goosen and the IRS, I’ll provide a summary of the Tax Court’s holdings, as they provide insight into how the court will analyze worldwide endorsement income earned by a nonresident professional athlete.

TaylorMade, Izod, Titleist:

Rolex, Upper Deck, EA Sports:

I was surprised at the informal mannter in which the Tax Court “guessed” at several key allocations, including splitting the on-course endorsement income 50/50 between royalty income and personal service income, then again in sourcing the royalty income 50% to the U.S. Both amounts were completely arbitrary, with no quantitative analysis performed. 

Will this forgiving approach benefit US nonresidents who wish to source endorsement income outside the US in the future, or will it simply reflect a one-case anomaly?