Apparently the dude who caught it has to pay taxes on it. But how can they place a value on it if he hasn't gone to market with it? Any speculation as to what the ball might bring is just that, speculation. The ball retails for about $8, tops. How does the government tax a speculated value? Suppose Bonds turns around and eats a live baby on TV, or pulls an OJ. The guy then sells the ball and gets $19.50 for it, and he had to beg to get that much for it. Does he get a refund for the tax he paid?
2007-08-10 03:17:20 · 7 answers · asked by Paul C 2 in Business & Finance ➔ Taxes ➔ United States
Who knows what will end up happening, I personally don't think the irs can tax the guy based on an estimate. I think they'd have to wait until he sells it, then we all know how much it was worth. I've attached the yahoo article about how the guy could have to pay taxes on the ball even if he doesn't sell it.
2007-08-10 03:27:10 · answer #1 · answered by Anonymous · 1⤊ 0⤋
While taxpayers and the IRS can calculate taxes based upon estimates, there MUST be a reasonable and rational means of arriving at the estimated figure. Here's an example:
A taxpayer has filed Schedule D for gains from the sales of some stocks. The IRS selects the return for a routine audit of the numbers on the Schedule D. The taxpayer does not have records of the actual purchase date and purchase price of the stock but thinks he has narrowed the purchase window down to a span of one month 30 years earlier. The taxpayer researched the stock price within that time-frame and took an average of the trading prices as their basis for the stocks. The IRS auditor reviews the taxpayers figures and widens the scope of the purchase window 2 months either side of the taxpayers estimated purchase date and discovers a sharply lower price within that expanded window. The auditor adjusts the cost basis down to the lowest trading price that existed in the expanded 5 month window and recalculates the capital gains tax due to the increased gain.
In this example both the taxpayer and the IRS used a reasonable and rational means of arriving at the basis for the stock. While there may be disagreement on the numbers, both have a reasonable argument should the issue go to the Tax Court.
In the case of the home run ball, this is such an unusual event that there is no reasonable and rational means to arrive at the value of the ball once it cleared the outfield and was ruled a home run. The only known provable value is the $8.00 or so as it left the pitcher's hand at least until the ball is offered for sale.
Even a "what if" scenario of "What would you pay for the ball?" is meaningless until a sale is actually completed. What someone says that they would pay for the ball without being committed to follow through with the purchase and what they might actually bid knowing that their bid constituted a legally binding contract could be widely divergent numbers. Even a highly qualified appraiser of sports memorabilia uses past trends and recent sales of similar items when valuing an article much in the same way that a real estate appraiser uses comparable sales when estimating the value of a home.
Given the unusual once-in-a-lifetime nature of this event, any estimate of value absent an actual sale of the ball would be a wild guess. That is not sufficient basis for the IRS to levy any tax prior to the sale of the ball and the taxpayer would likely prevail in Tax Court should they attempt to do so prior to an actual sale.
2007-08-10 11:20:59 · answer #2 · answered by Bostonian In MO 7 · 2⤊ 0⤋
Paul C asked -- "The ball retails for about $8, tops. How does the government tax a speculated value? ".
Answer -- by utilizing the appraised value by a competent and qualified appraisor. This happens often on "hard to value assets". Basically, it is the Fair Market Vaue.
Can the IRS tax him on the FMV of the ball? I think they can. It is substantially no different than winning a door prize ... and there is plenty of case law supporting the taxation of a door prize.
Will the IRS take that position? My guess is it's 50/50.
2007-08-10 13:36:02 · answer #3 · answered by CPA/PFS 2 · 0⤊ 1⤋
a) If Bonds ate a baby on TV, the ball would be worth SOOOOO much more.
b) if he sells the ball, then he has to pay taxes on the amount he sells it for, since he is making a profit. Anything you sell and make a profit on is taxed by the government. If he sells it for $8, he would pay taxes on the $8. If he sells it for $800,000, he would pay taxes on $800,000.
2007-08-10 10:22:16 · answer #4 · answered by Janelle 2 · 0⤊ 1⤋
Just because one publicy-hound lawyer makes the statement that he'll have to pay tax whether he sells it or not, you assume that's true? Why? It's just one guy's stated opinion, not something that's shown to be true.
Look at what's happened in the past in similar situations. Tax has been assessed at time of sale.
A value can't really be placed on it unless and until he sells it. At that time, taxes would definitely be due.
2007-08-10 11:10:49 · answer #5 · answered by Judy 7 · 0⤊ 1⤋
The ball is taxed based on estimated worth. For example, say you win a car, you are taxed on the new asset based on its appraised worth.
If he sells the ball for less than the assessed value, he can write it off as a loss, and thus, will be reimbursed the taxed amount.
2007-08-10 10:26:06 · answer #6 · answered by euchre_king_03 2 · 1⤊ 3⤋
He would get a refund if the value drops...It is considered a LOSS...i read that yesterday...
But yeah, what a crock of shite that they are taxing on speculation...
2007-08-10 10:26:37 · answer #7 · answered by That Guy 3 · 1⤊ 3⤋