The team issued a statement Tuesday acknowledging the arrangement.
"The organization wishes JR and his family well and appreciates and thanks him for his contributions in the community, to the team and his role in the 2016 NBA Championship," the statement said.
Smith and the Cavaliers' front office have been at odds all season. General manager Koby Altman previously discussed Smith leaving the team, and Smith chose to remain. But the situation was inflamed Monday, when Smith gave an interview to The Athletic in which he essentially accused the Cavs of tanking.
"I don't think the goal is to win. The goal isn't to go out there and try to get as many wins as you can," he told The Athletic. "I think the goal is to develop and lose to get lottery picks. I think that was always the plan."
Cleveland star Kevin Love, appearing on The Jump along with teammate Channing Frye and former teammate Richard Jefferson, said the Cavs are skewing younger, but it's hard to see a veteran such as Smith leave after four consecutive trips to the NBA Finals.
"It is tough to lose a guy like that, when you have been in the trenches with him and you have been to war with him," Love said. "[Frye and Jefferson] know what JR has meant to this team and this city. He was one of the fan favorites, and he was a guy who played both sides of the ball."
Frye said "the worst thing in the NBA is to be in the middle," but the Cavs are putting in the effort and improving.
"I think for us, we have a lot of repair, and we have a lot of young talent. You need to allow them to play, but under a good system and good culture," Frye said. "For us right now, our record does not reflect how hard these guys work and how much better I feel we have gotten. But we still have a long way to go."
Smith, who played just six minutes in the Cavs' loss in Detroit on Monday, had already requested a trade and will work out privately until one can be implemented. The two sides are not currently considering a buyout arrangement, sources said. Smith is earning $14.7 million this season, and $3.8 million of his $15.6 million salary for next season is guaranteed.
Playing time for Smith had a role in coach Tyronn Lue's firing by the franchise earlier this season. Lue favored veteran players such as Smith, Frye and Kyle Korver, whereas the front office preferred that the Cavaliers play younger players, including rookie point guard Collin Sexton.
The Cavs are 2-13, and Love is out indefinitely following toe surgery, though he said on The Jump that he expects to be back "sometime after the new year." If the Cavs' draft pick doesn't fall in the top 10 after this season, the selection goes to the Atlanta Hawks as part of a 2017 trade for Korver. That could incentivize the Cavs to make sure they finish with one of the worst records in the league.
Smith's contract is grandfathered in to a quirk in the collective bargaining agreement allowing for his full salary in the 2019-20 season to be counted in possible trades. Under the new rules, only the guaranteed portion of a salary can be counted for matching purposes. As such, Smith's contract has a measure of value in trade next summer, and because of that, the Cavs have been reluctant to proceed with a buyout, sources said.
Smith, 33, is averaging a career-low 6.7 points and shooting just 34 percent this season.