Buyouts Question

Discussion in 'Pistons and NBA' started by kpaav, Jan 15, 2007.

  1. kpaav

    kpaav Bench Warmer Forum Donor

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    With the recent popularity of the buyout I ask this question. Does the money still count against the cap, or when you buy out a player the cap number (over the length of the contract) is voided. I know there is the Penny rule, but I thought that was a onetime thing last year.
  2. roscoe36

    roscoe36 All-Star Administrator

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    The one time buyout (Allan Houston Rule) only allowed a team to avoid paying tax on the one salary they cut. It still counted against their cap total, limiting their ability to spend in free agency.

    Webber's buyout will count against the cap for two years, however the Sixers were able to negotiate down the total, and probably save some significant money in tax.

    The Sixers also have an expiring contract coming off the books next year in Joe Smith. This buyout really helped them cleanup the books.

    Hope that helps. If you have any more questions, feel free to ask.
  3. kpaav

    kpaav Bench Warmer Forum Donor

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    so instead of his contract amount the buyout amount prorated through the length of the original contract is what the cap amount is, or the cap hit stays the same, but doesn't count for lux. tax purposes?
  4. roscoe36

    roscoe36 All-Star Administrator

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    Well, the one time amnesty thing doesn't apply. That was only when they negotiated the new CBA in 2005.

    His buyout is basically a contract re-negotiation. On the condition he is released, Chris gave up some money to make that happen.

    The buyout will be spread over the two years remaining on his contract.

    These are rough #s.

    He was scheduled to make

    2006 - $20,718,750
    2007 - $22,312,500

    That's a total of $43,031,250

    He was bought out for a reported $36 million.

    So the $36 million is spread over two years, and allocated to the cap based upon the amounts owing on the original deal (awkwardly phrased).

    So in 2006, he was to receive 48.1% of $43,031,250 and in 2007, 51.9% of $43,031,250.

    So the cap hit in 2006 will be (48.1% of 36 million) $17,316,000 and the cap hit in 2007 will be (51.9% of 36 million) 18,684,000.

    He may be paid out all at once or not, but that is irrelevant to how the money is allocated to the cap.

    Keep the questions coming if you have them.
  5. jammertime

    jammertime Starter 1x Fantasy Champion Forum Donor

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    Dude, that was a great explanation! I feel smarter just reading it!
  6. kpaav

    kpaav Bench Warmer Forum Donor

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    Awesome. Thank you
  7. TWOTIMESRALPHI

    TWOTIMESRALPHI Starter 3x Fantasy Champion Forum Donor

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    Roscoe, you're so good informed, it's awesome. I love these posts since the system is so extremely different from the one over here.

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