Tax Court Divides Endorsement Income into Personal Service Or Royalty Earnings

The court noted of Goosen's endorsement deals: “The TaylorMade, Izod and Acushnet endorsement agreements (collectively, the on-course endorsement agreements) required petitioner to wear or use [the companes'] products during golf tournaments. In contrast, the Rolex, Upper Deck [for trading cards] and Electronic Arts [for a video game] endorsement agreements (collectively, the off-course endorsement agreements) did not have this requirement.” Petitioner Goosen and the respondent tax commissioner agreed that the off-course endorsement income was royalty income. The on-course endorsement agreements didn't allocate the amount the companies would pay Goosen for personal services apart from the right to use the golfer's name and likeness. The tax court found: “Petitioner's endorsement income depended, however, on his playing in tournaments. The record shows that the performance of services and the use of name and likeness were equally important. We find that 50[%] of the endorsement fees petitioner received represented royalty income and 50[%] represented personal services income.”