Very True.
But the other is tax deductible.... which actually is better... if my understanding is correct.
All accountants out there, please tell us if the following is close to accurate.
Example (obviously numbers are wild, simplistic guesstimates):
1. Assume Money Source (aka Ruiz Nil and GatorVersionofRuiz Bag) is in a 40% incremental (all in) tax bracket
2. Assume the recruit is in a 0% tax bracket before bag/or/nil $ received.
3. The Bag is $100,000 vs The NIL is $155,000
4. Ruiz NIL has a $66,000 deduction after considering payroll taxes ($165k x .40) , so his net cost is $99,000
5. The recruit gets $155,000 from Ruiz, which costs $165,000 to Ruiz inclusive of payroll taxes but recruit pays a blended rate of 28%.. so nets $111,600 if Ruiz NIL vs keeping $100,000 if they took the Gator Bag.
Summation:
1. Ruiz NIL is ever so slightly better after tax for him than the GatorBagVersion, AND, the recruit keeps 11.16% more ($11,600 more) in this example
2. Ruiz NIL and the recruit getting Ruiz NIL are not at risk of the IRS bringing criminal charges against either or both.