The High Court

Deep Thinkers Only...

Iron Mike, CPA

 

 

 

What can we learn from Mike Tyson?.....Math doesn’t lie!

By Darth Reagan

 

 

I’m not a guy that sits around thinking of excuses for Mike Tyson, I’m just not. I will admit that he’s the only boxer I ever wanted to watch fight and I always wanted him to win. But that’s as far as it goes for me. Call him a “Greek Tragedy”, a “lost soul” or whatever you choose. Unfortunately, I can only view him as just another example of an extremely successful athlete that blew it financially. As I listen to commentators attempt to figure out where he will fit in with the legends such as Holmes, and I wasn’t even aware Holmes was a legend but that’s an argument for another time, I start to glaze over with thoughts of Tyson losing $300,000,000. Yes, three hundred million dollars! One might think it would be next to impossible to spend that much money in a lifetime; much less over 20 years. However, upon further review I can show you why losing $300,000,000 isn’t that hard because of one simple fact. Math doesn’t lie!

 

Remember the days when life was simple. The days when you had twenty bucks in your pocket and felt like you were living the dream. You knew you had enough for at least 3 meals, a six pack, a movie ticket and laundry money. The math worked out like this: 3 meals at McDonalds for $7.50, a six pack for $4.00 and a movie ticket for you and a date for $8.50, a total of $20.00......The only problem was the fact that there was no money left for laundry. Simple fix; let it pile up in the corner and wait for another day to do it! It’s really no different than Mike Tyson’s situation except the dirty laundry was the IRS and he can’t call home for money anymore.

 

So here it is, my best estimate of Mike Tyson’s income over 20 years broken down year by year. Also, my best estimates of his expenses broken down year by year.

 

*(All estimates are pulled out of thin air to make a financial point)

	1985	1986	1987	1988	1989	1990	1991
Income	$10,000,000	$20,000,000	$25,000,000	$25,000,000	$25,000,000	$26,000,000	$4,000,000
Expenses
Taxes	$4,000,000	$8,000,000	$10,000,000	$10,000,000	$10,000,000	$10,400,000	$1,600,000
Last Year's Taxes	$0	$12,000,000	$18,000,000	$20,000,000	$20,000,000	$20,400,000	$12,000,000
Agent Fee	$1,000,000	$2,000,000	$2,500,000	$2,500,000	$2,500,000	$2,600,000	$400,000
Legal Fees	$250,000	$500,000	$625,000	$625,000	$625,000	$650,000	$100,000
IRS Penalties	$0	$600,000	$900,000	$1,000,000	$1,000,000	$1,020,000	$600,000
Home Mortgage	$200,000	$250,000	$300,000	$300,000	$300,000	$300,000	$300,000
Auto Purchases	$300,000	$300,000	$300,000	$300,000	$300,000	$300,000	$300,000
Other Expenses	$1,500,000	$3,000,000	$3,750,000	$3,750,000	$3,750,000	$3,900,000	$600,000
Pigeons	$50	$50	$50	$50	$50	$50	$50
What you Keep	$6,749,950	$1,349,950	-$1,375,050	-$3,475,050	-$3,475,050	-$3,170,050	-$10,300,050

 

 

 

As you can see by viewing the above figures, he has some basic expenses but he also has a list of expenses in yellow that really cause a problem for all of us; not just Tyson. The items in yellow are taxes (def. Money taken from our checks to fund a large bloated bureaucracy). As bad as I hate it, we still have to pay them. I used 40% as the highest bracket for this scenario (the highest bracket was 90% pre-Reagan).

 

Tyson started out with no money in 1984 following the Olympics, where he truly dominated. In 1985, he started making real money. Obviously, he owed the IRS for his 1985 earnings but he didn’t have a tax liability from 1984 to add…….However, in 1986 he owed current taxes and 85’ taxes…….the laundry started to pile up. Much like the odor of the laundry that piles up in the corner of your room, the same thing happens with the IRS; except the odor is in the form of a penalty……..as you can see Tyson would have owed $600,000 in penalties in 1986. No problem for him because he was going to earn more the next year and he did; for awhile. His income would eventually diminish to next to nothing in 1991 due to a jail sentence and he slid downhill the rest of the way!

 

 

1992	1993	1994	1995	1996	1997	1998	1999
$5,000,000	$5,000,000	$5,000,000	$10,000,000	$10,000,000	$15,000,000	$25,000,000	$15,000,000
$2,000,000	$2,000,000	$2,000,000	$4,000,000	$4,000,000	$6,000,000	$10,000,000	$6,000,000
$3,600,000	$4,000,000	$4,000,000	$6,000,000	$8,000,000	$10,000,000	$16,000,000	$16,000,000
$500,000	$500,000	$500,000	$1,000,000	$1,000,000	$1,500,000	$2,500,000	$1,500,000
$125,000	$125,000	$125,000	$250,000	$250,000	$375,000	$625,000	$375,000
$180,000	$200,000	$200,000	$300,000	$400,000	$500,000	$800,000	$800,000
$300,000	$300,000	$300,000	$300,000	$300,000	$300,000	$300,000	$300,000
$300,000	$300,000	$300,000	$300,000	$300,000	$300,000	$300,000	$300,000
$750,000	$750,000	$750,000	$1,500,000	$1,500,000	$2,250,000	$3,750,000	$2,250,000
$50	$50	$50	$50	$50	$50	$50	$50
-$755,050	-$1,175,050	-$1,175,050	$349,950	-$1,750,050	-$225,050	$724,950	-$6,525,050

 

 

The above is an example of a financial Train Wreck…………

 

 

You can get the picture by looking at the chart. It truly was a financial “Train Wreck”…fast forward to 2005 and the picture is still the same as evidenced by the spreadsheet below. But I want you to notice three important line items: Agent Fees, Legal Fees and IRS Penalties:

 

 

	2000	2001	2002	2003	2004	2005	Career Earnings
Income	$15,000,000	$15,000,000	$15,000,000	$10,000,000	$10,000,000	$10,000,000	$300,000,000
							Career Expenses
Taxes	$6,000,000	$6,000,000	$6,000,000	$4,000,000	$4,000,000	$4,000,000	$120,000,000
Last Year's Taxes	$12,000,000	$12,000,000	$12,000,000	$10,000,000	$8,000,000	$8,000,000	$232,000,000
Agent Fee	$1,500,000	$1,500,000	$1,500,000	$1,000,000	$1,000,000	$1,000,000	$30,000,000
Legal Fees	$375,000	$375,000	$375,000	$250,000	$250,000	$250,000	$7,500,000
IRS Penalties	$600,000	$600,000	$600,000	$500,000	$400,000	$400,000	$11,600,000
Home Mortg.	$300,000	$300,000	$300,000	$300,000	$300,000	$300,000	$6,150,000
Automobiles	$300,000	$300,000	$300,000	$300,000	$300,000	$300,000	$6,300,000
Other Expenses	$2,250,000	$2,250,000	$2,250,000	$1,500,000	$1,500,000	$1,500,000	$45,000,000
Pigeons	$50	$50	$50	$50	$50	$50	$1,050
							Total Loss
What you Keep	-$2,325,050	-$2,325,050	-$2,325,050	-$3,850,050	-$1,750,050	-$1,750,050	$-38,551,000

 

 

What you can see by the final numbers is this: he owes nearly $40,000,000 in debt! He spent all of his money plus some…..Isn’t it amazing by looking at the numbers how clear it can become…….His agent made $30,000,000, his attorneys $7,500,000 and the IRS penalties added up to $11,600,000……..Everybody got rich except Mike. The only thing in his life that he truly enjoys, his pigeons, cost the least…

 

I guess the learning lesson from the Mike Tyson Story is this……..surround yourself with people you trust, spend more time than money with those people and remember one simple truth…..If you spend more than you make you will be broke………….Math doesn’t lie!

 

 

 

 

 

 

 

 

Mike Tyson’s career as a boxer may have come to an end on Saturday night, but his financial well-being has been on the canvas for years. (AP)