Do you think it's wrong for Matt Murphy to have to pay taxes even if he doesn't sell the Bonds home run ball?

Question

Personally i think it's insane... he shouldn't have to pay a dime untill he sells the ball... what'do you think?

Answer 1

I agree with the previous answer in that Matt Murphy won't have to pay any taxes on the ball he caught. The basis question is the sticky situation here. I know what Murphy wants. He wants his basis in the ball to be what the ball was worth when he caught it (i.e. approximately) instead of the cost of the ticket. If it's the cost of the ticket then he'll have a capital gain of 25% or 28% on the difference between the ticket price and the sales price if he sells it in the next year. If he takes the position that it's the value of the ball when he caught it (which is certainly an arguable side of the story), then he'll have a much lower tax on the sale of the ball.

Answer 2

Tax would have to be paid just as you would if you stumbled across a treasure chest. The question is whether tax would be owed immediately and whether it would be taxed as ordinary income (a higher rate) or capital gains (a lower rate). The government argument to tax it immediately is that it is the same as winning the lottery, which would be taxed as ordinary income in the year you won it. The taxpayer argument would be that you paid for a ticket to the game which gave you a basis (lets say $20) in any ball you caught. Since a ball can be considered a capital asset and have a "basis", unlike lottery cash, you can hold the ball as long as you wish and not pay taxes until sold. Under this taxpayer argument, the taxpayer would pay eventually pay tax at the capital gains rate on the difference between the sales price and the $20 basis. That's about as simple as I can put it. It has been a subject of much debate on the American Bar Association's tax attorney messageboard. Most seem to agree with the taxpayer argument, especially considering a few years ago the IRS said they would not immediately tax the person who caught the Mark McGuire ball. Regardless, I'd sell the thing immediately while there was still a lot of hype. Heck, maybe this was an effort to just build more hype.

Answer 3

Most tax professionals do not believe that he would owe any tax until the ball was sold. The IRS does not have any official opinion on the issue and no court has made a ruling. Catching a ball at a baseball game (unlike football) is part of the traditional experience for which you paid a price for the ticket. The basis in the ball would therefore be that ticket price. Like any other property that you own, if you sell it at a gain you will owe tax on that gain. I have not heard nor read about any knowledgeable person siting an authority for taxing the property upon receipt. The only thing that I could imagine would be the rule for people that win prizes at a game show. I do not think that it applies nor do I think that the IRS is going to test that position in such a rare event as the Bonds case.

Answer 4

What if Matt Murphy had won a car? Should he pay taxes on the value of the car even if he doesn't sell it?

He obtained (won) a valuable asset (the ball). Should he pay taxes on it even if he doesn't sell it?

Why does the first case sound fair, but the second case does not?

Answer 5

Who says he does? The IRS didn't say so, just some one lawyer who apparently likes to see his name in the paper. Do lawyers have such an honest reputation that you'll believe anything that one says?

Answer 6

there is a lot of things wrong with the tax law -- but if they give him a exception i would give my niece my farm and say i want the same exception.

Answer 7

It may not be fair, but it's the law. He should get at least three appraisals and use the lowest appraisal for a valuation.

Answer 8

yes i agree. the tax laws are out of control!