Murphy, who caught the ball will sell it because he needs to pay the tax for the value of the ball. The tax is based on the value of the ball. Could he sell the ball for ten dollars ($10.00) and claim the difference between the value and $10 as losses. This way his gain is only $10.
2007-08-22 08:51:18 · 8 answers · asked by Gil D 2 in Business & Finance ➔ Taxes ➔ United States
No, he'd get in trouble...I don't think he should have been assessed a tax until the ball was sold...it's really sad. He will make money on it in the long run, but, The ball is really only worth $10 until it is sold...Estimating what it might be worth is unfair, until it is on the market.
2007-08-22 09:02:21 · answer #1 · answered by Stacey 5 · 0⤊ 0⤋
He will need to claim the ball as a collectible. The ball is not income nor will it be tax as such in any way, anyone saying it will is mistaken or purposly trying to mislead. He has a zero cost base on the asset which currently does not have a hard value because it has never been sold so there are only guesses as to it potential worth. If he were to sell it within one year of aquisition the gain would be a Short Term Capital Gain and would then be taxed at his personal tax rate adjusted for the income from selling the ball which would be quite high. If he waited until he has held the ball for a year it is taxed as a Long Term Capital Gain so he would then pay at current rate a max which is 20% under the current code. He does not owe anything until the ball is sold. If he dies and has not sold the ball the government will attach a value to it for calculating Estate Taxes.
2007-08-22 09:26:55 · answer #2 · answered by VTXrider 3 · 0⤊ 0⤋
no, because even if that held up to IRS scruitiny, and it wouldn't, the loss only offsets his income. He has already stated that he doesn't have the kind of income needed to pay the taxes on the ball, so he doesn't have enough income to make use of the loss anytime soon. Even if he is allowed to suspend the loss and use it over time, its still not as good as selling the ball, paying the tax and pocketing what is left.
I'm not so sure that he couldn't win an argument that he doesn't owe taxes until such time as he were to sell the ball, but I guess the prevailing view at this point is they would be due and payable in the year he got the ball.
My prediction is that pretty soon teams will decide that every ball in play belongs to them and they'll print that on the tickets and hire people to retrieve the balls that are worth money. Too bad too, as it seems kind of nice that a regular guy like Murphy gets a windfall in a deal like this.
2007-08-22 09:07:02 · answer #3 · answered by John M 7 · 0⤊ 0⤋
A sale for less than market value has several implications. First, he still loses the ball and doesn't get as much money as he could. Second, he still received the ball and would owe the income tax for receiving it. Third, a sale for less than fair market value could possibly subject him to gift tax. He would be giving the buyer a $500K item for $10 and therefore engaging in a part sale-part gift transaction. He could use some lifetime credit to avoid paying the gift tax right now but may not want to use up that credit in this way.
2007-08-23 03:20:04 · answer #4 · answered by Anonymous · 0⤊ 0⤋
I'm not exactly sure how the IRS would handle this, but look these guys aren't stupid. If he "sold" the ball to his wife or mother, or something they would get their money somehow. Either they would say he made 500K and then gifted it to someone else, or force the new owner to pay tax; or something - who knows what but they will get their money.
This is clearly a tax dodge and a really lame one at that, so Murphy is not going avoid several 100K in taxes by doing something like this, more likely he'll get himself and whoever else into some serious trouble.
2007-08-22 09:48:04 · answer #5 · answered by Slumlord 7 · 0⤊ 0⤋
The ball's value is by definition what somebody is willing to pay for it.
Hey great idea for him to sell it to someone for $10. Then he only pays tax on that, so he pays maybe $1.50 tax and gets to keep the other $8.50 for himself. This is SO much better than selling it for half a million dollars, paying maybe $170,000 in tax, and being left with a measly $330,000 for himself. ???????????
2007-08-22 09:24:56 · answer #6 · answered by Judy 7 · 0⤊ 0⤋
If he sells the ball for $10, then the tax agency could still come back and tax him on its "estimated market value".
Our tax system is out of control, we need to revolt!
Tea party anyone?
2007-08-22 08:56:02 · answer #7 · answered by Gem 7 · 0⤊ 2⤋
that's ridiculous!
2007-08-22 08:56:22 · answer #8 · answered by Anonymous · 0⤊ 1⤋