Every year on July 1, Bobby Bonilla collects a check for $1,193,248.20 from the New York Mets. He has done so every July 1 since 2011 and will continue to do so through 2035. The date is so well known that baseball fans simply call it Bobby Bonilla Day.

For Mets fans, it is an annual punchline. For tax folks, it is something else: a reminder that when you get paid can matter almost as much as how much you get paid.

The Deal Behind The Day

Bonilla has not played for the Mets since 1999. In 2000, the team agreed to buy out the remainder of his contract, which was worth $5.9 million. Instead of paying him in a lump sum, the Mets agreed to defer the payments until 2011—and pay interest. Beginning that year, Bonilla would receive annual payments of $1,193,248.20 through 2035. The payments total about $29.8 million.Separately, Bonilla also receives $500,000 each year through 2028 under another deferred comp arrangement from the Orioles connected to his earlier trade.

Paying the $5.9 million immediately would have required a large cash outlay. Mets ownership reportedly believed it could earn returns on its investments, including investments with Bernie Madoff, that would outpace the 8% interest promised to Bonilla. (Madoff was arrested in 2008 and later pleaded guilty to 11 federal charges, including securities fraud.)

How That Relates To Everyday Taxpayers

Not every company has money invested in something that later becomes a Madoff-level mess. But there is almost always a reason for a deferral, and often, it comes down to cash flow.

Other times, the arrangement may be preferred by the employee. Some employees, especially highly paid executives, may want to defer income—and potentially tax—to create an informal retirement-focused cash flow, or avoid receiving a large payment in a year when other income is already high (such as when bonuses are paid).

The goal is to make both sides happy. That’s what happened here—sort of (Mets fans notwithstanding). The Mets got short-term cash flexibility. Bonilla got a long-term income stream with an attractive interest rate.

The Tax Question: When Is It Income?

For most individual taxpayers, income is taxed when it is actually or constructively received. Actual receipt is........

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