Ok. Here are the rules. One piece of good news, the TK isnt forced onto Orlando. Under the new rules we pay it. But there are still trade issues to deal with from a salary matching and cap standpoint. So lets break this down into impact of a Dwight trade....
Notes on trade bonuses:
For contracts and extensions signed before the current CBA took effect, a trade bonus is paid by the team receiving the player. For contracts and extensions signed under the current CBA, a trade bonus is paid by the team trading away the player.
Option years are not counted when determining the remaining value of the contract, unless already exercised. ETOs are counted.
Incentive compensation is not counted when determining the remaining value of the contract -- just base compensation.
A trade bonus cannot cause a player's salary to exceed the maximum salary, based on his years of service, during the year of the trade (see question number 96 for more information on this).
The value of a trade bonus is pro-rated during the season. In the above example, if the player is traded halfway through the fifth season, then the trade bonus would be $75,000.
96. How do trade bonuses affect team salary and trades?
The value of a trade bonus is applied to the team salary among the remaining years of the contract (excluding non-guaranteed years -- see question number 62, and years following an Option or ETO -- see question number 57), in proportion to the percentage of salary in each of those seasons that is guaranteed. For example, suppose the player from question number 95 is traded at the start of the fourth season of his contract. Per the chart in that question, the actual value of his trade bonus that season is $300,000. If every season of the contract is guaranteed, and there is no Early Termination Option, then $150,000 of the trade bonus is charged to each of the final two seasons of the player's contract, so a total of $1,150,000 is included in the team salary in each of those seasons. (Note that the allocation is not proportionate to the salary itself, but rather to how much of the salary is guaranteed. If the player from question number 95 had a higher salary in the fifth season than in the fourth season, his bonus would still be allocated equally to those seasons. However, if the fifth season was only 50% guaranteed, then two-thirds of the bonus would be allocated to the fourth seasons, and one-third to the fifth season.)
Suppose the same player has an Early Termination Option following the fifth season of his contract. In this event, the entire trade bonus would be allocated to the fourth season of the contract. The player would therefore count $1,300,000 against the team salary during that season.
In the special case of a contract where all additional years are non-guaranteed, the entire trade bonus is applied to the cap in the season in which the trade occurred.
Trade bonuses can be a nuisance. When a team trades for a player with a trade bonus, it must count the portion of the bonus that applies to team salary in that season as incoming salary. Let's say a taxpaying team wants to trade their $800,000 player for the player used in the example above, in the fourth season of that player's contract. Assuming there is no Early Termination Option or non-guaranteed season, $150,000 of the trade bonus counts in the current season, so the trade cannot be made. The team trading the $800,000 player can accept up to $1,100,000 in return (see question number 80), but the player with the trade bonus counts as $1,150,000 in incoming salary.
The CBA allows the player to waive part of his trade bonus, if necessary to make a trade permissible. To make the above trade work, the player would need to waive $100,000 of his $300,000 trade bonus. The bonus would then be worth $200,000, and $100,000 of that would be charged to the current season. The player would therefore count $1,100,000 as incoming salary, which exactly matches the maximum the other team can accept in return for their $800,000 player. The player is not allowed to waive more than the amount necessary to make the trade legal.
A player is also allowed to waive a portion of his trade bonus to make his incoming salary fit within another team's trade exception (see question number 82). In the above example, if the other team has a $1 million trade exception (and is not trading an $800,000 player), the player would have to waive his entire trade bonus in order for his incoming salary to fit within the trade exception.
Another potential difficulty is that a team trading a player with a trade bonus uses the player's pre-trade salary (without the bonus), when comparing salaries for trade. Here is another example, using the same player as before (assume the player's team is a taxpayer, and can accept 125% plus $100,000 of the player's outgoing salary).This time, let's assume our player has an Early Termination Option following the fourth season of his contract, so if he is traded during the fourth season, the entire bonus is allocated to that season. This means that following a trade, $1,300,000 would be included in his new team's team salary. Suppose a taxpaying team wants to trade their $1,400,000 player for this player. That team can accept $1,850,000 for their player, and since our player counts $1,300,000 as incoming salary, there's no problem on their end. But our player counts for $1 million as outgoing salary, so the most we can accept in return is $1,350,000. This means the trade doesn't work from our end. And in this case, waiving a portion of the trade bonus will not help.
A player's salary added to his trade bonus cannot exceed the maximum for that season (based on years of service). For example, in 2011-12 the maximum salary for a player with 7-9 years of service is $15,506,632. If such a player has a $15 million salary and a $1 million trade bonus, then his trade bonus is pared down to $506,632 when he is traded. This happens automatically -- the player has no say in the matter. The same is true for trades of rookie scale contracts that include a trade bonus. If the salary added to the trade bonus exceeds 120% of the player's scale salary amount (see question number 48) the trade bonus is reduced automatically when the player is traded.
If a team is capped at the "apron" ($4 million over the tax line) because it has used the Bi-Annual exception, Non-Taxpayer Mid-Level exception, or (beginning in 2013-14) acquired a player in a sign-and-trade transaction, and wants to acquire a player whose salary added to his trade bonus exceeds the apron, then the trade bonus cannot be reduced (even with the player's consent); the trade is simply illegal.
There is no recomputation of the allocation of a trade bonus based on whether the player does or does not invoke an option or ETO. For example, if a player with a five-year contract and an ETO following the fourth season is traded during the fourth season of his contract, then his entire trade bonus is charged to the team salary that season. If the player does not invoke his ETO that summer (locking in the fifth season), the allocation of the trade bonus does not change -- none of the bonus is charged to the fifth season. In other words, the allocation of a trade bonus always reflects the state of the contract at the time of the trade.
