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Aroldis Chapman - in the next two days?

Quick thoughts, 30 minutes or less...

1.  (Edit, 9:32 a.m.)  Susan Slusser of the Chronicle has a fresh report this morning that the A's remain a contender to sign Aroldis Chapman

2.  This report follows yesterday's fascinating blog post by Jorge Arangure, in which he described the tax implications of Chapman's upcoming deal.

The brief article is definitely worth the click for a better explanation, but the Cliff's Notes are as follows:

If Chapman signs in 2010, rather than 2009, his signing bonus becomes eligible to be taxed by the U.S. government.  If he signs in the next two days, his bonus money is completely tax free, thanks to his status as a resident of tax-free Andorra.

Let's put these two tidbits together, shall we?

It seems to me that the A's have a golden opportunity here to sneak in and acquire a player with a tremendous ceiling.  The Yankees and Red Sox are both up against self-imposed payroll thresholds, and appear unlikely to invest $10-to-15+ million of bonus money in Chapman at this point.  (Although, I do think the Red Sox will ultimately splurge on Beltre and exceed the luxury tax threshold to sign him).  Similarly, the Chicago teams appear to be nearly tapped out and the Mets just forked over a large commitment to Jason Bay

These facts lead me to believe that Chapman could indeed sign with a small-to-mid market team such as the A's or Marlins

You'd have to believe that the Marlins have the A's beat when it comes to location and lifestyle for a Cuban defector.  But the above-linked article by Arangure proves that, if the A's can be extremely swift and decisive, they could make an offer in the next two days that is actually less than what another team offers him after the New Year - and yet more valuable to Chapman than any other offer he receives after the 31st - thanks to the tax situation.

Let's take a look at this hypothetical contract, and we'll use a minor-league deal for simplicity's sake (since we're focusing on the signing bonus only), rather than the major-league deal that Chapman is likely to receive.

Scenario A:  Let's say Chapman received a $15M bonus - which at this point, might just seal the deal, even in a location he doesn't prefer.  If he signs that deal in the next 36 hours or so - prior to January 1st - he gets to keep all $15M.  Referencing Arangure's article again, this is because signing bonuses that are received outside the U.S., by a non-U.S. resident, and in a tax year in which the person did not work in the U.S., are not subject to U.S. taxes. (This also helps partially explain why top Latin prospects like Michael Ynoa often don't play on U.S. soil until the following season after signing multi-million dollar deals).

Scenario B:  If Chapman received a $15M bonus after December 31st, he'd be subject to U.S. taxes, because he will undoubtedly work on U.S. soil during the 2010 season.  Here's where the tax hit that Chapman takes could be mind boggling.  If he ends up losing 40% of that bonus to taxes, it's six million of his bonus money, and his net pay is $9M.  If it's a 35% tax, his net pay is $9.75M.

Now, let's go with my dream-world scenario going back to the beginning of this offseason - that the A's are truly serious about Chapman and are willing to pay him the best offer out there.  If the A's offer him a $15M bonus in the next two days, Chapman would be foolish to turn it down.  He would need to receive a bonus of $23-25M after the New Year in order to match the A's previous offer.

Completely unrelated:  Test video of Stephen Strasburg here. 

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