Buyouts in the middle of the season
Posted: Mon Feb 28, 2011 6:03 pm
How do buyouts get charged to the cap in the middle of the season?
I understand that buyouts are prorated against the cap in proportion to the original contract. Assume Player A is owed $10M over the next two years, with $4.8M this year and $5.2M next year. 48% of his remaining contract is owed this year, and 52% is owed next year. If he is bought out at the beginning of the year for $5M, his buyout gets charged in the same percentages. The cap hit would therefore be $2.4M this year and $2.6M next year.
But what happens if he is bought out on the middle of the season?
Let's say, this season is half over. Player A has already been paid $2.4M of his $4.8M salary owed this year. He is still owed $2.4M for the remainder of this year plus $5.2M next year. So at the moment he is bought out, 31.5% of his contract remains for this year, and 68.5% of his contract remains for next year. If he is bought out for $5M, is that split up in a 31.5/68.5 ratio? Or is the buyout charged to the cap with the original 48/52 ratio? In other words, is the cap hit $1.58M and $3.42M over the next two years? Or is it $2.4M and $2.6M?
I understand that buyouts are prorated against the cap in proportion to the original contract. Assume Player A is owed $10M over the next two years, with $4.8M this year and $5.2M next year. 48% of his remaining contract is owed this year, and 52% is owed next year. If he is bought out at the beginning of the year for $5M, his buyout gets charged in the same percentages. The cap hit would therefore be $2.4M this year and $2.6M next year.
But what happens if he is bought out on the middle of the season?
Let's say, this season is half over. Player A has already been paid $2.4M of his $4.8M salary owed this year. He is still owed $2.4M for the remainder of this year plus $5.2M next year. So at the moment he is bought out, 31.5% of his contract remains for this year, and 68.5% of his contract remains for next year. If he is bought out for $5M, is that split up in a 31.5/68.5 ratio? Or is the buyout charged to the cap with the original 48/52 ratio? In other words, is the cap hit $1.58M and $3.42M over the next two years? Or is it $2.4M and $2.6M?