Rev. Rul. 71-532

Revenue Ruling 58-145, C.B. 1958-1, 360, holds, in part, that a bonus paid to a professional baseball player solely as consideration for signing his first contract, without any requirement of subsequent service, and not contingent upon whether the player is retained by the club after a specified time, does not constitute wages subject to the withholding of income tax.

Revenue Ruling 69-424, C.B. 1969-2, 15, holds, in part, that the amounts paid to a college on behalf of a professional ball player under a "College Scholarship Plan" are "wages" subject to income tax withholding under section 3402(a) of the Internal Revenue Code of 1954 and for the purposes of the Federal Insurance Contributions Act and the Federal Unemployment Tax Act. The "College Scholarship Plan" is considered a part of the employment contract under which the player agrees to play baseball for three months for a specified monthly remuneration. However, the club is relieved of its obligation under the Plan if the player fails to report for spring training at the direction of the club. Thus, it cannot be said that the "scholarship" is furnished the player solely as consideration for signing a contract and on that point Revenue Ruling 69-424 is distinguishable from Revenue Ruling 58-145.

Held, under authority granted by section 7805(b) of the Code, Revenue Ruling 69-424 will be applied without retroactive effect with respect to wages paid prior to January 1, 1970.

Revenue Ruling 69-424 is hereby modified; Revenue Ruling 58-145 is hereby distinguished.