As a child growing up in the Panama Canal Zone my connection to the professional sports in the United States came primarily through the military's AFRTS television and radio programs. College and professional sports events were shown two weeks after the fact on TV and live on the radio. Since Panama had several players on the world champion Pittsburgh Pirates (Manny Sanguillen and Renny Stennet), Zonians were frequently Pirate fans and Steeler fans by default.

I recall hearing Franco Harris' " immaculate reception" live on AFRTS radio. I will remember that event as long as I live. Like any youngster growing up in suburbs in the States, I dreamt about being a college and professional athlete. I was a fairly good athlete but ended up liking the weight room more than the sports that I played. It was probably the result of an overdose of Hercules movies. My father had an employee whose son was the Pan American super heavyweight Olympic weightlifting champion at a time when Cuba had great lifters. The offer to train with him was, there but the gym was in a dangerous neighborhood where American kids did not belong. I settled for powerlifting in college and beyond. Remember, I do know Squat.

My image of the scholar-athlete was fueled by the Chip Hilton sports fiction series written by Clair Bee. I had the entire series of twenty-four books and read each one numerous times. Chip Hilton was the All-American kid, a tremendous three sport athlete (football, basketball, and baseball). He was raised by his mother who was widowed and was the perfect role model of the dutiful son who worked part-time as a soda "jerk" to help support his mother. He excelled in the classroom and on the playing field. He was the captain of every team he played on and was a leader on the field and off the field admired by colleagues and their parents for his stellar character. In college, he was an All-American in all three sports in college. He was an example of what I strived to become!

In the modern era, we ask ourselves, " Where have you gone, Chip Hilton?" In my mind, Tim Tebow is probably the best example of who comes to mind in recent times to personify the character and athletic talent of Chip Hilton. He is an exceptional role model and athlete. An intelligent NFL team would always be very well served to have a leader and role model in their locker room. Chip may have been stronger in the classroom, but Tim also married Miss Universe who is also a Christian.

The current social unrest has collided within every segment of American society including college and sports. In my view, civil liberties for all is the hallmark of American freedom, but the emphasis in college sports has become too much about winning and not enough about developing athletes who can "win" at life while marrying, and building and sustaining a family. I have long thought that Division I schools should lose a scholarship for each athlete that leaves school or who does not graduate.

This article focuses on tax planning for professional athletes who receive substantial one-time signing bonuses. The sad reality is that most professional athletes will never have another opportunity to earn that level of income money beyond their playing days. A combination of misspending and heavy taxation places many professional athletes in a difficult situation in retirement to match their debilitating physical ailments. The planning goal in this article is that if advisors provide a better mechanism to reduce and defer taxation on large signing bonuses, the money will be there when the professional athlete retires.

Strategy Overview

The proposed strategy allows the professional athlete to defer his signing bonus through a non-qualified assignment of the signing bonus. The signing bonus is not currently taxable to the professional athlete relying upon the provisions of the U.S.-Swiss Income Tax Treaty which was ratified in 1996 and amended in 2009. The special purpose vehicle (SPV) which holds the deferred signing bonus relies on the provisions of the Treaty.

Under the Treaty, investment income such as interest income is exempt. Short-and long-term capital gain income is exempt. Qualified dividend income is subject to a 5 percent withholding tax. Royalty income is not subject to any withholding tax. Nevertheless, an investment advisor may desire to invest deferred fee income in the SPV into assets classes which are subject to withholding taxes.

The proposed strategy provides a lending structure which allows the athlete to borrow up to 75 percent of the signing bonus at an exceptionally low interest rate in the current environment. The deferred income is ultimately taxed as ordinary income rates. The use of the Loan Method of Split Dollar provides for a conversion of tax deferred dollars into tax-free dollars.

The SPV held by the assignment company enters into a Loan Method Split Dollar arrangement with a trust established for the professional athlete. The trustee is the applicant, owner and beneficiary of a life insurance policy insuring the athlete's life. Trust ownership of the policy protects the policy from the personal credi