Barry Bonds baseball ...?

Question

Now that Barry Bonds has broke the all-time homerun record, here’s a fun question for you tax geeks. If you are the one who caught the ball, what are the tax consequences? Will he have to pay taxes on the ball because of ownership, or when they ... if they ... sell it?

Answer 1

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 giving any 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 2

Since the value of the ball can't be assessed without an arms-length sale the IRS will have to wait for a sale to levy any tax. Once it sells, there will be no question as to the value and assessing the tax at that point will be childs play.

If the value of the ball could be accurately assessed prior to a sale, the IRS could and probably would assess tax based upon that value. However there are no "comps" to base an estimate of the value upon given the once-in-a-lifetime nature of this event. Therefore a taxpayer claiming that there was no accurate valuation possible would probably win their case in court should the IRS attempt to pursue the issue prior to a sale. Given that the IRS can gain a lot of brownie points simply by waiting patiently for a sale there is virtually no chance that they will attempt to step in prior to a sale and levy any tax.

One blowhard of a tax attorney seeking some free publicity does not establish either policy or case law on the matter.

Answer 3

There has been debate on the issue of when taxation occurs in this case. As things have worked out the fan is selling the ball soon after the catch and will receive proceeds from that sale. It appears that there is either very little disagreement that he will owe taxes after the sale or people are not discussing the issue too much. Most seem to agree that upon sale we have an established value and that he has income which will need to be reported.

The bigger debate has been regarding whether the ball would be taxable even if he simply held onto the ball. There would certainly be a valuation issue without a sale but determining the value is probably a separate debate. Most seem to agree that the ball does have some significant value to collectors and is worthy of being auctioned. There are often valuation debates in matters of taxation and the competing appraisals are usually settled through negotiation with the IRS. We sometimes need values for one of a kind antiques, collectibles, family businesses, and other items with very limited comparables. Appraisals can still be obtained and then its a battle of appraisals.

The IRS Code in Section 61 states "gross income means all income from whatever source derived". The IRS Regulations further explain this phrase. IRS Reg 1.61-14 says in part "In addition to the items enumerated in section 61(a), there are many other kinds of gross income. For example . . . Treasure trove, to the extent of its value in United States currency, constitutes gross income for the taxable year in which it is reduced to undisputed possession."

There has been a prior debate regarding the definition of income and the matter was argued in the US Court of Appeals for the DC Circuit. The case was eventually reheard and the final decision was for a very broad definition of income under the code including any 'ascension to wealth' not expressly excluded under the Code. The Case is Marrita Murphy v. IRS and is cited in the sources below.

It does not matter whether one receives wealth in the form of cash or other items. Prizes and awards, found property, and buried treasure are all taxable income. Income of this type may not be earned income and therefore not subject to social security and self-employment taxes but it is still part of gross income.

There still is the possibility that there is unrealized wealth. If the fan kept the ball and it were to increase in value over time then that increase in value would only become taxable upon realization at sale. The initial receipt of the ball though is the issue in this case.

Unless there is an exclusion than any ascension to wealth is taxable as income. There are many exclusions like the sale of a principal residence under Section 121, the receipt of a scholarship under Section 117, or hundreds of others but I am not aware of an applicable exception in this case.

Answer 4

How is the IRS going to find out he has the ball?

When he caught it, did he have to sign something? A: No, and if he did, he's a moron. When he caught it, did he give out his social security number? I think it's safe to say he didn't.

So how is the IRS going to even know he has the ball without linking it to him somehow? It's not like someone is going to file a W-2 for it.

When he sells it, is someone going to report it to the IRS?

The fact of the matter is, the IRS was evil from the beginning and Americans don't owe most of the taxes they think they owe, but the IRS was never going to let them in on that little secret.

Yeah, it's difficult to go undetected by the IRS if you are earning income, because employers file W-2's. But in this case, even if there is some technicality requiring him to pay a tax on the ball (there isn't, by the way), the IRS wouldn't be able to collect on it unless the guy was a moron and submitted it to them on his own.

Answer 5

He may be taxed heavily by using the IRS for preserving the ball. The ball is properly worth some 0.5 a million funds as you suggested. This counts as a 0.5 a million earnings earnings. He might ought to pay in all probability approximately 0.5 that to be waiting to maintain the ball. It sounds humorous, however the fee the ball holds ought to alter into funds as quickly as he desperate to sell it. It must be taxed. you won't have the capacity to easily inherit 500 grand for unfastened you already know :)

Answer 6

Unless you live in NC where residents pay "personal property tax". This includes all tangible property assessed at "fair market value".

Answer 7

The person who was lucky enough to catch it will pay capital gains taxes on the profit when he sells it.

Answer 8

it is worth nothing at all until he sells it then he would have to claim the income.