Barry Bond's Balls

[xylene]

What is the name of your state? National League.

I had a question about the record* home run ball.

I was listening to the radio and I heard a report that the person catching the ball was planing to auction it.

The report suggested that the fan, Matt Murphy, was extremely motivated to sell as he would have tax due.

Any comments / or thoughts?

 

[moburkes]

I think that the IRS wouldn't comment either way, when asked. It was also stated that, while the IRS could tax having the ball, they hadn't previously done so, when presented with the opportunity to tax things like that ball.

He's also a college student. Did you hear about how his father reacted when he called him on the phone that evening? Pretty funny!

 

[tranquility]

Tax professors have discussed this topic as have many tax professionals ad naseum. The general consensus is that it is income at the moment it became owned by the person who caught it. There are many other general theories that come out in hope of changing that fact. However, morburkes is correct, the IRS has not taken a position in advance.

 

[xylene]

The general consensus is that it is income at the moment it became owned by the person who caught it.

A regulation baseball is like what maybe $10 max original sale price.

So the historical memorabilia value is imparted into the object before it is caught?

Well I have even more reason to hate Amerika's pastime.

 

[tranquility]

The problem of valuation comes up all the time in tax issues. There are many accepted ways to get the value of the item. One is an appraisal. If someone gives you a house, what's the amount which should be put on the gift tax return? Like the ball, there is no way to determine the value until someone at arm's length decides to buy it.

Even with the ball, think of this. Say ball catcher "sells" the ball to his dad for a dollar. Dad is on his deathbed and has ball catcher as his sole heir. What was the value of the ball?

For further information go to:

http://mail.abanet.org/scripts/wa.exe?S1=aba-tax
search for "baseball" and see some posts regarding the tax professional's discussion.

Also:
http://taxprof.typepad.com/taxprof_blog/2007/07/wsj-tax-consequ.html

read the comments and go to the links, and:

http://taxprof.typepad.com/taxprof_blog/2007/08/more-on-tax-con.html

To find out more then you probably wanted to know on the issue.

 

[tranquility]

That ball by itself isn't inherently more valuable than any other pop-fly ball caught at any other stadium.

I think it is. But, a related argument had to get to timing. The accreation to wealth is the moment the ball was caught and controlled by the ball catcher. The value of the ball is ordinary income at this time and taxes must be paid. Better for ball catcher is to have it be capital gains where the taxes are paid on the sale. (Based on the difference between the amount realized and the basis.)

One attorney said that at the time of the catch, it was of no greater value than any other ball. His ordinary income is $10 (or whatever). This is because *at this time* it is just a baseball as Barry Bonds was standing at home plate looking at it. Ball catcher now owns an ordinary baseball. While he owns it, Barry starts to round the bases. The rules of baseball require a person to go around the bases before one scores. In other words, it was *not* a "home run" ball at the time it was obtained by ball catcher. The increase in value only occurred after Bonds went around the bases. Which, although didn't take much time after the ball was owned, was after the ball was owned.

 

[moburkes]

That's a very interesting take on it. I like it!

 

[xylene]

The value of the ball is ordinary income at this time and taxes must be paid. Better for ball catcher is to have it be capital gains where the taxes are paid on the sale. (Based on the difference between the amount realized and the basis.)

Why would the ball catcher not owe income tax AND capital gains tax?

 

[tranquility]

Why would the ball catcher not owe income tax AND capital gains tax?

He might very well owe both. In the more likely example, he gets the ball appraised at X amount. Then, if at auction, the ball goes for X+Y amount he would have to pay ordinary income on X and captial gains on Y. If he, at auction, got X-Y, it is questionable if he would get the capital loss as the ball catch was not entered into with a profit motive. (I agree an argument could be made it was, but I don't think it is a winner.)

 

[xylene]

Does MLB owe gift tax? (since they are not asserting ownership of the ball.)

What about a 1099? The ball was caught inside the park as part of an organized sporting contest (just like a game show) by a paying attendee with limited rights restricting such things as re transmittal and even written and oral descriptions... It wasn't acquired by a stranger on the street or in a circumstance where it was ever lost.

 

[tranquility]

The ball was not "given" as it was not transferred through disinterested generosity. If it were a gift, there would be no tax due on the part of the ball catcher.

There was not a valuable transfer between the ball park and the person so a 1099 is not appropriate. A better analogy is called "treasure trove". If you find buried treasure, it's taxable.

 

[seniorjudge]

...

He might very well owe both.

....

That settles it.

I am joining the Libertarian Party!

 

[justalayman]

Ok, just to throw a bit of my normal confusion into things;

what if a guy catches the ball and then gives it to another (say, a kid with puppy dog eyes). Who owes the taxes since it was "owned" by the first catcher and then given to the kid (with puppy dog eyes)? Maybe when he sells the ball, he can get those fixed.

or as happened when another ball player hit a record homerun and their was a fight for the ball? At what point did anybody "own" the ball and who is liable for taxes?


btw xylene; catchy title. It seems everybody is interested in BB's balls but since he is known to juice, they might really be BB's bbs.

 

[xylene]

The ball was not "given" as it was not transferred through disinterested generosity.

The intention is of utmost importance in regards to its status as a gift.

Compeling the fans to return balls and or seizing sold balls as a stolen property would save memorabilia for history and save cost for foul balls and the like.

Respect and admiration are reasons for a gift.

 

[tranquility]

or as happened when another ball player hit a record homerun and their was a fight for the ball? At what point did anybody "own" the ball and who is liable for taxes?

I don't know offhand. I know there was a case decided on the issue of ownership a few years ago. If I'm not mistaken, one person had the ball under control and the other took it from his grasp. Obviously, there were factual issues to be determined, but the court had to apply the facts to the law. I'm sure you could find it somewhere on the internet as to how it was determined.

Info edit:
The decision in the case I was thinking of is at:
http://journalism.berkeley.edu/projects/scramble/judge_decision.pdf

what if a guy catches the ball and then gives it to another (say, a kid with puppy dog eyes). Who owes the taxes since it was "owned" by the first catcher and then given to the kid (with puppy dog eyes)? Maybe when he sells the ball, he can get those fixed.

I would say the first with a gift to the second. For some reason, if the person threw the ball back some lawyers felt there should be no income at all. But, I didn't get too far into the reasoning. It was only an esoteric discussion where I had little interest.

Respect and admiration are reasons for a gift.

Maybe so, but we're talking tax law. In tax law, the black letter law is "disinterested generosity". Each word has case law to give it meaning and substance. Together, even more so. Books have been written on what they meant. Especially when you start talking about estate taxes and complex trusts (Not in the accounting sense, but in a practical one.), the meaning gets very detailed. Many, many dollars can ride on if something is a gift or not.