Doing some weird math

[Dempsey-Louis]

Everyone (on this board) knows how Don King took advantage of Muhammad Ali by sending some guy named Jeremiah Shabazz to hospital to offer the ailing champ 50K in cash (and a release) in lieu of the 1.1 million King owed him, and that Ali ‘foolishly’ took the cash.

At first glance it is obvious, as with all things Don King that Don King is a predator, but it is also common to conclude that Ali’s mind was going and that by taking the cash he made a bad decision.

But if you think through the math maybe it wasn’t such a bad decision after all, maybe it was Ali who was a bit smarter than the other fighters who decided to go at it legally with King.

Ali, before taxes, received 45% of his own purses. (This figure had been thrown around back during ’71 for The Fight; not sure how accurate it is but most fighters usually got 40 to 60 percent of their purses.)

If you take the 1.1 million Don King still owed Ali, 45% comes out to just under $500,000 ($495,000), you then add in the top income tax rate for 1980 which was 70% and what comes out the other end is $150,000 for Ali. (Sad isn’t it?)

Had Ali chased King through the courts, the way Witherspoon and Holmes did, and was successful (no guarantee) Ali’s legal fees may have eaten up a good amount of the extra $100,000 he stood to gain.

In the end it may have been Angelo Dundee and Bundini Brown (and whoever else claimed a piece of Ali) who got burned, not so much Ali.

Pugilistic dementia aside, Ali might have been smart in taking the cash.

P.S. The Economic Recovery Tax Act of 1981 slashed the highest rate from 70 to 50 percent; but Ali had earned the money in 1980.

[BattlingNelson]

Hmmmm. 70% of the full amount would be 770k leaving 330k for Ali and that would be if the 70% tax was for the entire amount and not for the margin earned over certain amount.

Furthermore regarding the loan. Was it money Ali had lend King or was it money King owed because of Ali having worked for him? In the case of the former there should be no taxation as that money would have already been taxed.

Or maybe you are saying that the 1.1M was a purse from which Ali would have to pay his manager, trainer etc?

[Dempsey-Louis]

Hmmmm. 70% of the full amount would be 770k leaving 330k for Ali and that would be if the 70% tax was for the entire amount and not for the margin earned over certain amount.

Furthermore regarding the loan. Was it money Ali had lend King or was it money King owed because of Ali having worked for him? In the case of the former there should be no taxation as that money would have already been taxed.

Or maybe you are saying that the 1.1M was a purse from which Ali would have to pay his manager, trainer etc?

That is what I am saying (assuming it was purse money) he would still have to pay out to his people 55% of the 330K.

I had never heard that it was a 'loan' if that is the case than the entire 1.1 million would go to Ali, not to taxes or his entourage. If so, then taking the cash would have been a big mistake.

I always assumed it was purse money, but after what you said, I realize I have no clue what the 1.1 million actually constituted.

[Dempsey-Louis]

Hmmmm. 70% of the full amount would be 770k leaving 330k for Ali and that would be if the 70% tax was for the entire amount and not for the margin earned over certain amount.

Furthermore regarding the loan. Was it money Ali had lend King or was it money King owed because of Ali having worked for him? In the case of the former there should be no taxation as that money would have already been taxed.

Or maybe you are saying that the 1.1M was a purse from which Ali would have to pay his manager, trainer etc?

I came across something esle that chnages things a bit. It seems that Ali wuld NOT have been subject to a 70% rate but a 50% rate. There was an exception in the tax law at the time called The Maxi Tax.

This is an excerpt from some tax expert who worked for the company that handled Ali's taxes during the 70s.

Now almost forgotten, the Tax Reform Act of 1969 enacted section 1348, which imposed a 50 percent maximum rate of income tax on "personal service taxable income," which unquestionably encompassed income for boxing. In 1976 the marginal rate on other income exceeded 50 percent for taxable income more than $52,000 (for joint returns) and topped out at 70 percent for taxable income more than $200,000. The 50 percent "maxi tax," as it was called, thus provided substantial tax relief to many taxpayers.

But there is still bad news. This is a referred quote from Muhammad Ali regarding his purses.

So, as Ali more than once explained to me, "one-third belongs to Herbert, one-third belongs to the government, and one-third belongs to me." It was not that the government (or Herbert) was taking one-third of his earnings, but that his share of the pie never exceeded one-third. Maybe Ali was content with the one-third share left to him by the 50 percent maxi tax because that was generous compared with the much smaller fraction that the income tax laws had left to Louis and even to Ali himself when he first attained the heavyweight championship in the
1960s

But we still don't know if Ali had to share that 1/3 with Dundee and Bundini.

Complete article from the tax expert guy:

http://www.capdale.com/files/18540_M...0160809LEM.pdf

P.S. Can you believe at the end they were hitting Joe Louis with a 91% rate?

[QueensburyRules]

--- Yup, and a good portion of that 91% was purses donated to the war effort.

IRS is shameless and soulless and congress no better. Joe's management stellar in guiding his career, but hung him out to dry on his finances.

[Dempsey-Louis]

--- Yup, and a good portion of that 91% was purses donated to the war effort.

IRS is shameless and soulless and congress no better. Joe's management stellar in guiding his career, but hung him out to dry on his finances.

Yea - Julian Black (promoter); John Roxborough (ex pimp and bookmaker); Truman Gibson (lawyer) what a trifecta they were.

The only one who was any good was Jack "Chappy" Blackburn his trainer.

[OctoberRed]

Yea - Julian Black (promoter); John Roxborough (ex pimp and bookmaker); Truman Gibson (lawyer) what a trifecta they were.

The only one who was any good was Jack "Chappy" Blackburn his trainer.

I haven't heard some of those names like Blackburn in ages.

[QueensburyRules]

--- no offense, but I don't look to this crowd for tax advice.

King was an apex crook, of that there is no doubt. Don't weep for Ali as he signed his name away in some million dollar marketing deal before his death that leaves his family set for generations as long as the company survives.

[OctoberRed]

--- no offense, but I don't look to this crowd for tax advice.

King was an apex crook, of that there is no doubt. Don't weep for Ali as he signed his name away in some million dollar marketing deal before his death that leaves his family set for generations as long as the company survives.

What about Holyfield fox tax advice?