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From the LA Times - Trading Vernon Wells was no small luxury for Angels


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Person familiar with the situation says that part of the incentive to send the high-priced outfielder to the Yankees was to help put the Angels under the $178-million luxury tax threshold.

— The Angels' trade of Vernon Wells to the New York Yankees, which is expected to be finalized Tuesday, will have financial implications beyond the $13 million or so the Angels will save over the next two years by shipping the veteran outfielder to the Bronx.SvnG1T8ntb4

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Here's an article from New York's perspective:

 

http://www.nydailynews.com/sports/baseball/yankees/weight-wells-contract-crush-yanks-article-1.1298453

 

This trade is genius. I wouldn't be surpised if they change the rules with the next CBA to prevent this sort of thing from happening again. 
 

Cash considerations sent as part of trades aren't divided up according to annual value for the luxury tax, they're applied year by year.

 

This means Angels pay Wells $9M in 2013 and $20M in 2014. Yankees pay $12M and $1M, respectively.

The average AAV of Wells' contract is $18M

 

This means the following numbers are counted for the luxury tax:

 

$9M Angels / $9M Yankees in 2013

$20M Angels / -$2M Yankees in 2014.

 

Angels stay just under the cap in 2013 but go over in 2014 (maybe way over if they decide to extend Trout, Trumbo and others). Yankees stay over in 2013 but get under the cap in 2014. If this trade doesn't happen, both teams likely remain above the cap in both years.

 

Since the tax rate depends on number of consecutive years over the cap, this trade could actually save both teams considerable amount of money regardless of what Wells does on the field. That plus the trade frees up a logjam on the Angels and potentially fills a hole created by injuries on the Yankees. 

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