Can you tax some one on an item that was caught at a baseball game, solely because it broke a world record?

Question

Here's the story...

The 21-year-old New York man said Tuesday he had no choice but to sell the ball — several people told him he would be taxed on the souvenir just for holding on to it.

"It wasn't hard. It was simple math. I'm upset by the decision I had to make," Murphy said. "I wanted to keep it. I'm young. I don't have the bank account. ... It would have cost me a lot more to keep it."

I never knew that you could be taxed on an item that became a part of hisotry, due to who made contact with that object. Do they tax antiques stores as well? Or museums for what and who they hold? Is this a law? Is this common practice?

Answer 1

You will notice that it wasn't the IRS that told him that. In fact, a few years back in a similar situation, when the same rumors were rampant, the IRS Commisioner came out with an announcement essentially that that idea was craxy.

If and when he sells the ball, he'll pay capital gains on the sale.

Answer 2

If the value of the ball could be accurately assessed prior to its sale, yes tax could be levied on it. However due to the once-in-a-lifetime nature of the event it's not feasible to accurately assess the value without a sale taking place. As such, no tax would be due until it sells. Once it sells, it's value is now known and tax will be due at that point.

There's no doubt that the ball is burning a hole in his pocket. And it's possible that the ball would drop in value as more balls become the "record" ball. And if Mr Bonds is stripped of his record if the "juicing" allegations are proven then it may eventually be worthless. Mr. Murphy would be well advised to unload it now as it may be a "Pig in a Poke" in short order.

The short answer is that if you sell something for more than you pay for it, it's taxable income. I have an antique chest of drawers that I bought at a car boot sale in England about 23 years ago for about $10. It's worth thousands. If I sell it, I'll owe tax once it sells. That's how the system works.

Answer 3

I'm guessing that he can be taxed on the baseball under the rules of constructive receipt. However, my personal opinion is that he should not be taxed until he actually sells the baseball. Accordingly, he should wait at least a year before seling it since it would be taxed as a capital gain.

Before he does sell the baseball, he should request an advisory opinion from the IRS. This way, he will have a straight answer from the IRS.

Answer 4

The income from an item acquired as a prize, such as the baseball in question, is based on its "fair market value." What this amounts to could easily be the subject of some dispute. So the fan is taking the sensible way out: sell the thing, for whatever it willl bring, and that will define its fair market value.

Answer 5

Its just a BALL---he would NOT have had to pay tax on it if he KEPT the ball---what he SHOULD have done was given to the baseball hall of fame rather then selling it because now he must pay sales tax on the money he received for the ball...had he KEPT it---it would have been worth whatever you can buy a ball for IN A STORE... no real value is placed on something like that UNTIL it is SOLD...