What's in a Number? Apparently Tax and Contract Issues

Twelve days ago, I discussed Reggie Bush's challenge to a long-standing NFL rule requiring running backs to wear a number in the 20-49 range. Yesterday, the NFL's competition committee -- not surprisingly -- rejected his request that he be permitted to wear No. 5. A release by The Associated Press (reprinted in USA Today) noted that, since 1973, the only major change to the NFL rule was made last year, when receivers were given permission to wear numbers in the teens because teams were running out of numbers in the 80s due in large part to an increase in receivers and tight ends on rosters.

Interestingly, as noted in the press release, a player will often change a number to accommodate another player, often selling the rights. For example, New York Giants punter Jeff Feagles traded No. 10 to Eli Manning in 2004 in exchange for a family vacation, and then also traded No. 17 to Plaxico Burress last year in exchange for an outdoor kitchen addition on Feagles' home. Clinton Portis bought No. 26 for $40,000 from safety Ifeanyi Ohalete when he joined the Redskins. Portis paid $20,000 up front but declined to pay the rest after Ohalete was cut by the Redskins and picked up by Arizona. Ohalete then sued Portis for the balance and they ended up settling the matter for $18,000.

This is what I love about sports law -- something that seems so innocent, like one player simply permitting another to wear a jersey number, amounts to some complex legal issues. For example, what are the tax consequences on the exchange? In order to determine the taxable gain on the sale, the seller's basis needs to be determined. What's the selling player's basis in his number? Is it a cost basis? - which, presumably would be zero in which case the entire benefit received would be taxable. Or could the selling player argue that this transaction is nothing more than a non-taxable gift from the purchasing player (i.e. the payment was made out of "detached and disinterested generosity")?

Also, there are some interesting contract and property issues involved here. Why does a player even have the legal right to sell a jersey number to another player in the first place? Does the club own the rights to the numbers, and have the continuing exclusive authority to grant and condition the use of the numbers by the players? Is this a sub-license arrangement in which maybe the selling player (the licensee) needs to first get permission from the club (the licensor)? Assuming a player even has a property right in his number that he can sell, why would Ohalete have any further rights to his number with the Redskins after he was cut by them?

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