How Transfer Pricing Can Help Fix a Student Athlete Pay Problem

Ever since student athletes gained the right to be compensated for use of their image in advertisements and merchandise sales, the money has flooded in, but so have some problems.

While the athletes can now be compensated for their name, image, and likeness—or NIL—schools still can’t directly pay them for playing, and the NCAA has rejected any notion of “pay-for-play.” Instead, athletes can receive compensation when merchandise with their name or number is sold or for showing up in advertisements or social media posts for businesses.

But the line between NIL and pay-for-play can get blurry. A business owner who wants to support the team could overpay an athlete in an NIL deal, raising a question: Is it a bona fide business deal?

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On this week’s episode of Talking Tax, University of Kentucky professor Stephen Lusch talks with reporter Caleb Harshberger about how transfer pricing and tax law concepts can help show whether the deals are done at reasonable prices that really reflect the value the student brings.

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